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The International Accounting Standards Board (Board) is discussing feedback on the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment. In September 2021 the Board decided to prioritise performing further work to:

  1. make tentative decisions on the package of disclosures about business combinations; and
  2. analyse specific aspects of the feedback on the subsequent accounting for goodwill.

The Board will consider the project’s direction at a future meeting.

IASB® Update November 2021

The IASB met on 16 November 2021 to redeliberate aspects of the IASB’s preliminary views on improving the disclosure requirements in IFRS 3 Business Combinations. (The Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment sets out the IASB’s preliminary views on this matter.)

Expected synergies arising from a business combination (Agenda Paper 18A)

The IASB discussed aspects of the feedback on its preliminary view of requiring an entity to disclose (a) the estimated amount or range of amounts of the synergies, and (b) when the synergies are expected to be realised.

To understand better the practical concerns raised by respondents the IASB is testing examples with stakeholders. For the purpose of testing those examples the IASB decided that the examples should illustrate disclosure of information about:

  1. total expected synergies disaggregated by nature; for example, total revenue, total cost and totals for other types of synergies; and
  2. when the benefits expected from the synergies are expected to start and how long they will last (which would require an entity to identify whether those synergies are expected to be one-off or recurring).

Eleven of 12 IASB members agreed with these decisions.

The IASB also tentatively decided:

  1. not to define ‘synergies’.
  2. not to make changes to its preliminary view as a result of feedback on other specific aspects of its preliminary view.

Eleven of 12 IASB members agreed with these tentative decisions.

Contribution of the acquired business (Agenda Paper 18B)

The IASB tentatively decided:

  1. to retain the requirement in paragraph B64(q) of IFRS 3.
  2. to explain the objective of the requirement in paragraph B64(q)(ii) of IFRS 3 but not to provide guidance on how the information required by paragraph B64(q)(ii) should be prepared.

Eleven of 12 IASB members agreed with these tentative decisions. One member was absent.

The IASB tentatively decided to specify in paragraph B64(q)(ii) of IFRS 3 that the basis that an entity applies in preparing the information required by that paragraph is an accounting policy. Nine of 12 IASB members agreed with this tentative decision. One member was absent.

The IASB tentatively decided to replace the term ‘profit or loss’ in paragraph B64(q) of IFRS 3 with ‘operating profit or loss’. ‘Operating profit or loss’ will be as defined in the IASB’s Primary Financial Statements project. Eleven of 12 IASB members agreed with this tentative decision. One member was absent.

The IASB tentatively decided not to add a requirement to disclose information about cash flows arising from operating activities. Ten of 12 IASB members agreed with this tentative decision. One member was absent.

Liabilities arising from financing activities and defined benefit pension liabilities (Agenda Paper 18C)

The IASB discussed feedback on its preliminary view on developing proposals to specify that liabilities arising from financing activities and defined benefit pension liabilities are major classes of liabilities. The IASB tentatively decided to achieve the objective of its preliminary view by not specifying that these liabilities are major classes of liabilities but instead by proposing to amend:

  1. paragraph B64(i) of IFRS 3 to remove the term ‘major’; and
  2. paragraph IE72 of the Illustrative Examples accompanying IFRS 3 to illustrate liabilities arising from financing activities and defined benefit pension liabilities as classes of liabilities assumed.

All 12 IASB members agreed with this tentative decision.

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