Accounting for goodwill in IFRS 3 and IAS 36 - The consequences of the current impairment-only model and its relevance compared to other models

As of 2004, goodwill is subject to an annual impairment test. In June 2015, the International Accounting Standards Board (IASB) completed the Post-implementation Review of IFRS 3 Business Combinations and, following this review, it decided to conduct a research project, called the Goodwill and impairment research project, aiming among others at determining whether the current impairment-only model represents the most appropriate subsequent accounting for goodwill and whether it should or could be improved. In line with this research project, this paper aims at assessing whether the current impairment-only model is the best approach regarding the subsequent accounting for goodwill. In particular, this paper focuses on the conceptual and practical relevance of the current model and compares this relevance with that of other models, in order to find the (already existing or not) best approach for the subsequent accounting for goodwill. In order to do so, the paper starts by depicting some fundamental concepts as well as the current requirements. It subsequently briefly compares these requirements with those applying in North-America. Thereafter, it reviews these requirements in light of IASB’s, literature’s, practitioners’ and personal arguments and findings. It next displays a critical and personal analysis of the existing alternative models and improvements to the current subsequent accounting for goodwill. It then concludes by presenting a personal alternative model that, in the opinion of the author, may tackle most of the issues identified.