馃攳
Debrief: Discussion Paper: Business Combinations鈥擠isclosures, Goodwill and Impairment - YouTube
Channel: unknown
[5]
the ISB has published a discussion paper
[9]
on the accounting requirements for
[11]
acquisitions the IRS standard that deals
[14]
with acquisitions is i-43 which we
[17]
issued in 2004 and these discussion
[21]
paper really results from our post
[22]
implementation review of that standard
[24]
to assess whether it works as we
[27]
intended originally the review
[30]
identified a couple of issues that we
[32]
indeed needed to take a closer look at
[35]
one concern highlighted by the review is
[38]
that investors currently do not get
[39]
proper information about how well
[41]
acquisitions perform and they need this
[44]
information to hold management to
[46]
account about all the money that they
[48]
spent and in this discussion paper we
[52]
suggest possible new disclosure
[53]
requirements about the management's
[56]
objectives for the acquisition and in
[58]
the following years how well the
[60]
acquisition is actually performing
[62]
against those original objectives and
[65]
that is really the key change that the
[67]
board is suggesting the second concern
[70]
highlighted by a review is about how
[72]
goodwill is accounted for in subsequent
[74]
years following an acquisition people
[78]
have concerns about the impairment test
[80]
that companies are required to do every
[82]
year to check whether the goodwill that
[84]
they have on the balance sheet is still
[86]
worth as much as the balance sheet
[88]
actually says and people have mixed
[91]
views on the effectiveness of this
[93]
impairment test many think that the
[96]
impairments are recognized too little
[99]
and too late and indeed most failed
[102]
acquisitions have been identified by
[104]
investors well before actual impairment
[108]
takes place moreover many companies
[111]
complain that it is an expensive
[113]
exercise and very complex
[116]
however the impairment test is certainly
[119]
not meaningless it is just that it tests
[121]
a broader set of assets than just
[123]
goodwill moreover when actually
[127]
impairment does take place it has
[129]
confirmatory value for investors and
[131]
that is very valuable information we
[136]
have looked at how to deal with these
[137]
concerns
[138]
tried hard to find a more focused
[140]
alternative impairment test but we found
[143]
no testing alternatives that targets
[145]
goodwill significantly better and isn't
[148]
much more expensive at the same time
[150]
however to reduce costs to companies of
[154]
doing the tests we propose moving from
[156]
an annual test to a trigger based based
[159]
test that will save companies some money
[162]
but it will not result in a loss of
[164]
information to investors because
[167]
impairment is often too little too late
[169]
many would like to see a reintroduction
[171]
of amortization which was the method
[173]
that we used before 2004 it is a simple
[177]
method of reducing goodwill and takes
[179]
pressure of the entire parent test it
[182]
also prevents endless buildup of
[184]
goodwill which might come tumbling down
[186]
generating an economic downturn but it
[188]
is very arbitrary because determining
[190]
the periods over which you amortize
[193]
goodwill is very subjective and many
[196]
investors would for that reason probably
[198]
add back the amortization church because
[201]
they think it provides them little or no
[203]
information current thinking of the
[205]
board is to retain the impairment only
[207]
approach however it must be set only a
[210]
very narrow majority voted for this
[213]
therefore the discussion paper will
[215]
provide a detailed overview of pros and
[217]
cons of both the impairment only
[219]
approach and the amortization method we
[223]
would welcome any comment from
[225]
stakeholders on this topic particularly
[227]
any new arguments or evidence mergers
[230]
and acquisitions are a key part of the
[232]
business world deals announced in 2019
[235]
only amounted to no less than four
[237]
trillion dollars therefore reporting on
[240]
acquisitions is a very important topic
[243]
and I encourage everybody with an
[246]
interest in this topic to response to
[248]
our consultation the comment deadline is
[251]
the 15th of September of this year
[262]
you
Most Recent Videos:
You can go back to the homepage right here: Homepage