23. November 2021

ASCG comments on IASB Information Request on the subsequent accounting for goodwill

The ASCG staff today submitted its response to the IASB’s Information Request on the subsequent accounting for goodwill.

In the context of deciding whether to (re)introduce amortisation of goodwill or to retain the impairment-only approach, in September 2021 the IASB staff had asked for assessments on the feasibility of estimating a useful life of goodwill and on the potential impact of the transition to an amortisation model on existing/historical goodwill balances.

In its response, the ASCG first outlines the relevant provisions of the German Commercial Code (HGB) and the corresponding specifications of GAS 23 Accounting for Subsidiaries in Consolidated Financial Statements for determining the useful life of goodwill.

Based on the assessments of the large auditing firms in Germany, it also concludes that the criteria stated in GAS 23 are well suited to estimating the useful life of goodwill in a comprehensible and verifiable manner.

With regard to the possible effects of the transition to scheduled amortisation under IFRS on existing goodwill, reference is made to the high amount of goodwill of German companies applying IFRS. It is therefore expected that the (re-)introduction of an amortisation model would be challenging for the companies concerned. Accordingly, the IASB is advised to discuss any transitional provisions for the reintroduction of amortisation at a very early stage and ‘test’ them with the companies most affected, e.g. by conducting further outreaches.

The ASCG staff also sounded this feedback with chief accountants of listed companies and members of working groups of German preparer’s organisations.

We have to note, that the document was prepared by the ASCG staff. It is made available to the public so that the proceedings of the communication between the ASCG staff and the IASB staff can be followed. The document does not reflect official positions of the ASCG or its technical committees. Those positions are solely set out in the German Accounting Standards and in ASCG comment letters as approved by the technical committees.