Goodwill impairment – Who cares? | KPMG | GLOBAL

Goodwill impairment – Who cares?

Goodwill impairment – Who cares?

KPMG report highlights stakeholder support for rethinking treatment of goodwill under IFRS

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Valuable insights on stakeholder views of accounting for goodwill impairment.

A series of stakeholder interviews conducted by KPMG highlights that the current IFRS model of mandatory annual impairment testing of goodwill without amortisation is due for a re-think.

We interviewed a sample of stakeholders to find out what they thought about goodwill impairment testing – its relevance, its effectiveness, the difficulties and the disclosures.

What our interviewees said

  • Although goodwill impairment testing is relevant in assessing how well an investment has performed, its relevance to the market is in confirming rather than predicting value.
  • The degree of subjectivity in goodwill impairment testing limits its effectiveness. And the high number of judgements and assumptions make goodwill impairment testing a complex and time-consuming exercise.
  • Many companies think that the level of impairment-related disclosures is excessive, but others do not share that view. Analysts, in particular, would be in favour of more disclosures.
  • There is considerable support for a return to an amortisation-based model of accounting for goodwill.

Three unanswered questions

  • If the cost of compliance is high and the value relevance of goodwill impairment testing is less significant, then could the model be simplified?
  • If a key benefit of goodwill impairment testing is accountability, then how could that still be achieved in a simplified model?
  • Why do users want enhanced disclosures – is it related to goodwill impairment or something else?

Read our report to find out more

Find out more about our interviewees' responses, and our remaining unanswered questions, in our report Who cares about goodwill impairment? (PDF 623 KB) Now is the time to engage.

© 2017 KPMG IFRG Limited is a UK company, limited by guarantee. All rights reserved. KPMG IFRG Limited, registered in England No 5253019. Registered office: 15 Canada Square, London, E14 5GL, UK.

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