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Goodwill and Impairment - IASB Research Project


Project History


The objective of this IASB research project is to consider how to address issues reported during its Post Implementation Review of IFRS 3 Business Combinations (PIR).

EFRAG contributions through proactive work

EFRAG published its first research paper on goodwill accounting in 2014, together with the Italian and Japanese standard setters. This was followed by a quantitative study on trends in goodwill and impairment over ten years, published in 2016. In June 2017, EFRAG issued its third reserach publication: the Discussion Paper Goodwill test: can it be improved? which examined a number of potential amendments to the goodwill and impairment test.

Recent develpments


During the course of the project, the IASB considered a number of ways to address the 'too little too late' goodwill impairment issue, and how it could improve the disclosures for business combinations. Some argue that one of the causes of the delayed recognition of goodwill impairment is the shielding effect created by internally generated goodwill and other factors. Another potential cause is that the impairment test does not directly measure the recoverable amount of the goodwill. To address these concerns, the IASB developed the headroom approach; however, the approach was considered overly complex and not explored further by the IASB.

After concluding that it would not be possible to make the impairment test significantly more effective, the IASB decided to refocus the objectives of the project as follows: 

  1. Objective A - Exploring whether to simplify the accounting for goodwill by permitting an indicator-only approach to determine when an impairment test is required; and/or reintroducing amortisation of goodwill;
  2. Objective B - Exploring whether to improve the calculation of value in use by permitting cash flow projections to include future restructurings and future enhancements to an asset; and the use of post-tax inputs in the calculation of value in use; and
  3. Objective C - Identifying disclosures to enable investors to assess management's rationale for the business combination; and whether the subsequent performance of the acquired business, or combined business, meets expectations set at the acquisition date.

At its meeting in June 2019, the IASB reached preliminary views on the project objectives mentioned above.  The IASB tentative decisions reflect many of the suggestions put forward in EFRAG's 2017 Discussion paper.


At its meeting in July 2019, the IASB staff asked for permission to begin the balloting process for a discussion paper. The IASB's discussion paper is expected by February 2020 with a proposed comment period of 180 days. In July 2019 the FASB issued an Invitation to Comment (ITC) on Identifiable Intangible Assets and Subsequent Accounting for Goodwill.  The FASB ITC considered similar issues to those being considered in the project.


At its meeting in March 2019, the EFRAG TEG-CFSS discussed developments on the project. Further discussions were held with the EFRAG User Panel at its July 2019 meeting and with the EFRAG Academic Panel in October 2019. EFRAG TEG discussed the IASB tentative decisions at its meeting in November 2019.


Throughout the development of the project, EFRAG has engaged in various forms of outreach including consultations on EFRAG Discussions Papers (published jointly with its partners) that examined different aspects of goodwill and impairment and sought solutions to the issues identified.


To respond to the IASB's forthcoming discussion paper, EFRAG will continue its outreach efforts to better understand the implications of the IASB tentative decisions and whether they bring a satisfactory response to the concerns reported by preparers and users of financial statements  on the accounting for goodwill impairment and the information value it conveys, during the PIR and in subsequent IASB discussions.

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