It has also identified a number of areas – including the effectiveness and complexity of testing goodwill for impairment and subsequent accounting for goodwill – where it will carry out further research.
The narrow-scope amendments to IFRS 3, Business Combinations, follow the board’s post-implementation review that it recently undertook. This showed that while there is general support for the standard’s accounting requirements, there are some areas where further action or research is needed.
The board identified as an immediate priority the need for clearer guidance to help preparers distinguish between a business and a group of assets when applying IFRS 3. But it also earmarked two issues of “high significance” where it has decided to carry out research.
As far as the effectiveness and complexity of testing goodwill for impairment is concerned, the board is considering reviewing IAS 36 and making improvements to the impairment model, particularly whether there is scope for simplification.
On the subsequent accounting for goodwill, the research might encompass whether and how the costs of accounting for goodwill can be reduced without losing the information that is currently being provided by the impairment-only approach.
The board suggests that this could include considering how improvements to the impairment-only approach (specifically, the impairment test) could address some of the concerns that have been raised. It could also look at whether a variation on an amortisation and impairment model could be developed with an amortisation method that does not undermine the information currently provided by the impairment‑only approach.
The second narrow-scope amendment, which is intended to clarify how a company should account for a previously-held interest in a business, when acquiring control or joint control of that business, was developed through the IFRS interpretations committee.
The board had been told of differences that had developed in accounting for previously held interests in the assets and liabilities of a joint operation in both types of transactions.
The proposed amendments are to IFRS 3 and IFRS 11, Joint Arrangements.
The deadline for comments on the exposure draft is 31 October 2016.