Business Combinations—Disclosures, Goodwill and Impairment

The IASB met on 24 January 2023 to discuss its project on Business Combinations—Disclosures, Goodwill and Impairment. In particular, the IASB discussed:

• an exemption from disclosure requirements; and
• disclosures related to synergies expected from a business combination.

Exemption from disclosure requirements (Agenda Paper 18A)

The IASB tentatively decided in September 2022 to propose an exemption from disclosing some information about business combinations in specific circumstances.

At the January 2023 meeting, the IASB tentatively decided to propose a principle for an entity to apply when using this proposed exemption. An entity applying the principle would be allowed to use the exemption from disclosing a particular item of information if disclosing that information can be expected to prejudice seriously any of the entity’s objectives for the business combination.

All 12 IASB members agreed with this decision.

To help entities apply this exemption, the IASB tentatively decided to propose application guidance. This application guidance would require an entity:

1. to consider factors including the effect of disclosing the information and the availability of the information in determining whether the exemption is applicable.
2. to consider whether it is possible to disclose information at a sufficiently aggregated level to resolve concerns while still meeting the objectives of the disclosure requirements.
3. to disclose, for each item of information to which an entity has applied the exemption, that it has applied the exemption and the reason for applying the exemption to that item of information.
4. to reassess in each reporting period whether the application of the exemption to an item of information is still appropriate. If it is no longer appropriate to apply the exemption, the entity would be required to disclose the item of information previously exempted. An entity would be required to perform that reassessment for as long as the entity would otherwise be required to disclose information about the subsequent performance of the business combination.

Eleven of 12 IASB members agreed with this decision.

The IASB tentatively decided:

1. to require an entity to disclose a qualitative statement of whether actual performance of a business combination in subsequent periods met the entity’s target for the business combination; and
2. to permit an entity to apply the exemption agreed in this meeting to that qualitative statement.

Nine of 12 IASB members agreed with this decision.

Expected synergies (Agenda Paper 18B)

The IASB tentatively decided in September 2022 to propose adding to IFRS 3 Business Combinations a requirement for an entity to disclose quantitative information about synergies expected from a business combination in the reporting period in which the business combination occurs. 

At the January 2023 meeting, the IASB tentatively decided to require an entity:

1. to disclose quantitative information about expected synergies by category (for example, total revenue synergies, total cost synergies and the total for each other type of synergy).
2. to consider, for any case in which a disclosure of totals by category would qualify for an exemption, whether disclosure as a total for all categories could remove the reason for applying the exemption to the total by category and, if so, to disclose the total of all categories.
3. to describe the synergies by specifying each category of expected synergy.
4. to disclose when the benefits expected from the synergies are expected to start and how long they will last. This disclosure would require an entity to identify whether the synergies are expected to be finite or indefinite. 

All 12 IASB members agreed with this decision.