The IVSC has received a number of questions recently from constituents asking whether principles underlying business valuations are compatible with the concept of goodwill amortisation. The IVSC Boards have discussed the topic and concluded that the best way to aid the public discussion is by publishing a three-part article series to explore certain fundamental questions in this area, aiming to inform financial statement preparers, reviewers, and users, and aid the capital market.

Questions the IVSC plan to explore in the three-part article series include:

  • Is goodwill a wasting asset with a readily determinable life, or an indefinite lived asset?
  • What is the information value of the current goodwill impairment process to financial statement users and does that information value justify the compliance costs borne by preparers?
  • Can the current impairment test (as well as acquisition accounting) be improved to increase the information value for users with little or no incremental cost?
  • What are the potential consequences of a change from the current impairment model to goodwill amortisation?

In this, the first of three articles, the IVSC explore whether goodwill is economically a wasting asset, and if so, if the life and implicit decline in value can be reasonably estimated and supported.