The members of the EACB gladly take the opportunity to comment on the IASB consultation about Goodwill and Impairment. The EACB welcomes the IASB’s effort to improve the information companies provide to investors, at a reasonable cost, about the businesses those companies buy and would help to hold management to account for its decisions to acquire those businesses.
However, EACB questions the feasibility of the approach outlined by the IASB from a preparer’s perspective.
First, we think that the information about profitability/subsequent performance of an acquisition is highly sensitive. While our members understand and support the aim to provide information on the strategic reasons behind acquisitions, it must be noted that the information is quite often available and widely described – at least the material one – in press releases. Instead, disclosing information in relation to the extent to which an acquisition is meeting chief operating decision maker’s (CODM’s) objectives, synergies and their cost is quite complex and sensitive. Should this information exist, it may not be easily available, and it implies costly operational challenges. Besides this, we are not convinced about the relevance of including this information within the financial statements. We see it as a “management information” rather than an “accounting information”. Thus, EACB believes that it should belong to the management report and not be included in the financial statements, because they represent non-GAAP indicators that will be difficult to audit. Moreover, it could create a competitive distortion between US and European entities. The US GAAP require less information than the one displayed in the Discussion Paper proposals.
The EACB strongly support the reintroduction of amortization. We believe that the goodwill is a consumable asset with a useful lifetime which ends when the expected synergies would be effective. We do consider that the amortization is the only way to show the consumption of goodwill over its useful life and prevent the entities from recognizing “internal goodwill”. Nevertheless, if the reintroduction of amortization were not to be the pursued route, the EACB strongly believes that adjustments are needed concerning the impairment Test (see Q6 for more details). Indeed, we see that the costs of performing the impairment test are significant, partly related to the complexity of IAS 36 and also to the frequency of the impairment test. EACB members believe that improvements are feasible both concerning the cost and the usefulness of the information presented in the test.