The International Accounting Standards Board (IASB) has proposed a number of changes to help provide investors with better information about acquisitions. 

It has published an exposure draft that responds to stakeholder feedback around acquisitions reporting. Investors currently feel they lack sufficient and timely information about acquisitions or post-acquisition performance. 

While companies want to provide investors with useful information, they see risks and costs in doing so, particularly when it comes to commercially sensitive data. As a result, there is no proposed requirement to disclose information that could compromise any acquisition objectives.

Stakeholders are also concerned about the effectiveness and complexity of the impairment test for operations that have been allocated goodwill.

IFRS 3 Business Combinations

The IASB proposes amendments to IFRS 3 Business Combinations, requiring companies to report the objectives and related performance targets of their most important acquisitions. This includes whether these are met in subsequent years. 

Companies would also be required to provide information about expected synergies for all material acquisitions. 

IAS 36 Impairment of Assets

The IASB also proposes related amendments to IAS 36 Impairment of Assets to make targeted improvements to the impairment test. These include plans to remove a constraint on cash flows used to calculate value in use – an entity is currently prohibited from including cash flows arising from future restructuring that it hasn’t committed to or from improving or enhancing an asset’s performance.

The IASB also aims to remove the requirement for entities to use pre-tax cash flows and discount rates in calculating value in use. Instead, it proposes that an entity would use “internally consistent” assumptions for cash flows and discount rates.

IASB seeks feedback on all proposals, with the comment period ending on 15 July 2024. 

“More transparency about acquisitions is critical to investor confidence,” said Andreas Barckow, Chair of the IASB. “In developing this package of proposals, the IASB has maintained an active dialogue with all stakeholders. Our aim is to ensure a balanced approach to enhancing the information companies provide to investors about acquisitions, while also considering the risks and costs to companies.”

ICAEW’s Corporate Reporting Faculty will be responding to this consultation and will keep members informed of any relevant developments. Members are welcome to provide their thoughts on the consultation by emailing crf@icaew.com.