Business Combinations – Disclosures, Goodwill and Impairment: Disclosures

Objective

This survey seeks input on the IASB’s tentative decisions on its project Business Combinations - Disclosure, Goodwill and Impairment[1] regarding the disclosure requirements for business combinations (referred to as "to be proposed disclosure requirements").

This survey contains questions on the following aspects of the to be proposed disclosure requirements:

• thresholds for determining a subset of business combinations that would comprise a ‘strategically important’ business combination;
• application and level of aggregation of the exemption from disclosing information in specific circumstances; and
• quantitative information about expected synergies.

The objective of this survey is to help EFRAG’s project team to better understand whether the to be proposed disclosure requirements in the paragraph above can be applied in practice and whether they meet the intended objectives at a reasonable cost.

Please submit your answers to the EFRAG project team[2] by clicking on the "Submit" button at the end of the survey by 30 November 2023. Thank you for completing the survey.

The collected information will remain confidential. Unless permission to do so is granted, information used in any reports will be presented in such a way that no individual company or person can be identified. However, the list of respondents will be made public, unless they explicitly requested anonymity.

[1] https://www.ifrs.org/projects/work-plan/goodwill-and-impairment/
[2] If you have any queries please contact Isabel Batista (isabel.batista@efrag.org), Galina Borisova (galina.borisova@efrag.org), or Ioanna Michailidi (ioanna.michailidi@efrag.org)
 

Structure of the survey
This survey is divided in five parts:

1. General information;
2. Thresholds for determining a ‘strategically important’ business combination;
3. Exemption from disclosing information in specific circumstances;
4. Quantitative information about expected synergies in the year of acquisition (Optional); and
5. Other.

This survey is aimed at preparers of financial statements who have conducted business combinations within the scope of IFRS 3 Business Combinations in the last three financial years (2020, 2021 or 2022).
 

Background
In June 2015, the IASB completed the Post-implementation Review of IFRS 3 and in response to the feedback received, the IASB decided to undertake improvements to the accounting and disclosures for business combinations.

In March 2020, the IASB published the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment (the “DP”). The DP explored whether companies can, at a reasonable cost, provide users of financial statements with more useful information about the business combinations that companies undertake. Specifically, the DP researched whether[3]:

1. companies could provide better information in the financial statements about business combinations, in particular, information on the subsequent performance of a business combination;
2. the impairment test could be made more effective at recognising impairment losses on goodwill on a timely basis and at a reasonable cost;
3. amortisation of goodwill should be reintroduced;
4. the impairment test could be amended to reduce its cost and complexity; and
5. some intangible assets should be included within goodwill.

Almost all users that responded to the DP stressed that the to be proposed disclosure requirements in the DP would help them better understand the rationale of the business combination and to hold management to account for those business combinations.

However, many preparers had concerns about providing such information, particularly because the new information requested could be commercially sensitive, forward-looking, costly and unavailable if the acquired business were integrated into the acquiring company’s operations.
Given this feedback, in its redeliberation process and reaching its tentative decisions, the IASB has tried to find a solution that would be acceptable to both preparers and users.

The IASB expects to publish an exposure draft in the first half of 2024.

[3] Please note that (2) – (5) are not addressed in this survey.

Part (a): General information