The International Accounting Expectations Board is thinking about variations to its policies that would call for organizations to disclose additional information and facts about how their acquisitions have performed.
In a discussion paper introduced on Thursday, the IASB reported traders want additional information and facts on irrespective of whether takeovers reside up to expectations and imagine present-day disclosures necessary beneath IFRS policies — these kinds of as the yearly test for goodwill impairment — are not sufficient.
The board’s preliminary view is that the necessity to disclose the main reasons for an acquisition ought to be replaced with a necessity to disclose the strategic rationale for undertaking an acquisition and management’s objectives for the acquisition at the acquisition day.
Furthermore, the information and facts a enterprise discloses about an acquisition’s subsequent performance “should reflect the information and facts and metrics the company’s management utilizes to watch and evaluate the acquisition’s progress versus the objectives of the acquisition.”
“Investors want greater information and facts about how acquisitions are doing to aid them maintain a company’s management to account,” IASB Chair Hans Hoogervorst reported in a information release. “Our instructed alternative aims to satisfy investors’ requirements without remaining far too expensive for organizations.”
The IASB sets accounting policies that are mandatory in additional than a hundred and forty nations around the world. In accordance to the discussion paper, traders have reported organizations normally do not offer plenty of information and facts to aid them evaluate irrespective of whether management’s objectives for an acquisition are remaining met — for case in point, irrespective of whether the synergies management hope from an acquisition are remaining recognized.
The board reported it regarded as increasing the impairment test by requiring a enterprise to report at an previously day if its goodwill had misplaced worth, but concluded “there is no alternative that can target goodwill greater and at affordable cost.”
There is also “no distinct proof that amortizing goodwill would significantly increase the information and facts that organizations report to traders,” the IASB reported.
Stakeholders have till Sept. 15 to remark on the discussion paper. The emphasis “is extremely much on a set of disclosures to aid traders definitely understand acquisitions and irrespective of whether they have gone very well or not,” IASB Vice Chair Sue Lloyd instructed Reuters.