IASB consults on proposals to improve reporting of acquisitions

The International Accounting Standards Board (IASB) has published a package of proposals aimed at enhancing the information companies provide to investors about acquisitions.

Acquisitions continue to play a significant role in the global economy, with deals totalling US$3.2 trillion announced in 2023, according to data from Bain & Company^[1]. Investors need to understand the management decisions behind important acquisitions.

The proposals in the Exposure Draft published today respond to stakeholder feedback that reporting on acquisitions poses difficulties for both investors and companies:

• Investors lack sufficient and timely information about acquisitions and post-acquisition performance.
• Companies seek to provide useful information to investors but see risks and costs in providing some information, particularly commercially sensitive information that could be used by competitors.

Stakeholders have also expressed concern about the effectiveness and complexity of the impairment test for operations which have been allocated goodwill.

The IASB is proposing amendments to IFRS 3 Business Combinations. The proposed amendments would require companies to report the objectives and related performance targets of their most important acquisitions, including whether these are met in subsequent years. Companies would also be required to provide information about the expected synergies for all material acquisitions. However, companies would not be required to disclose information that could compromise their acquisition objectives.

The IASB also proposes related amendments to IAS 36 Impairment of Assets to make targeted improvements to the impairment test.

Andreas Barckow, Chair of the IASB, said:

More transparency about acquisitions is critical to investor confidence. 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.

The IASB is inviting feedback on these proposals. The comment period for the Exposure Draft Business Combinations—Disclosures, Goodwill and Impairment is open until 15 July 2024.

Exposure Draft and supporting material

• Read and comment on the Exposure Draft.
• Access the Snapshot on the Exposure Draft.

This short video explains the IASB’s package of proposals.

[1] Used with permission from Bain & Company