The Board of the International Organization of Securities Commissions (IOSCO) has today published its report “Recommendations on Accounting for Goodwill” for issuers, audit committees (or those charged with governance), and external auditors aimed at enhancing the reliability, faithful representation and transparency of goodwill recorded and disclosed in the financial statements.
IOSCO believes that the recommendations contained within the report will also be useful to standard setters, including the International Accounting Standards Board, as they pursue initiatives to enhance business combination disclosures and related matters of goodwill impairment testing.
The report is a result of the work of IOSCO’s Committee on Issuer Accounting, Audit and Disclosure (Committee 1), in recognition that the risk of unrecognised impairment on accumulated goodwill and related disclosures, including “close call” situations, is an area of concern, particularly in times of increasing economic uncertainty. The report was preceded by a 90-day public consultation launched in June 2023, that sought input from a wide array of stakeholders to identify good practices on this topic.
IOSCO remains committed to supporting consistent application and enforcement of high-quality reporting standards and disclosure regulations, which are of critical importance to the proper functioning of the capital markets. This report will underpin IOSCO’s continued productive engagement with standard setters on improvements to accounting, reporting and disclosure requirements related to goodwill.
In that context, IOSCO again reminds issuers of the importance that their accounting and disclosures result in a fair and transparent presentation of the financial position, performance and cash flows of the company. This means the goodwill should not be stated at an amount in excess of its recoverable amount, that impairment losses should be recognised in a timely manner, and that disclosures of significant judgements and key assumptions related to the recoverability be transparent.
