IAS 36 seeks to ensure that an entity's assets are not carried at more than their recoverable amount (i.e. Business Combinations Business Combinations — SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S. GAAP Consolidation — Identifying a Controlling Financial Interest Contingencies and Loss Recoveries Contracts on an Entity's Own Equity Convertible Debt Current Expected Credit Losses Disposals of Long-Lived Assets and Discontinued Operations … Business Combinations Business Combinations — SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S. GAAP Consolidation — Identifying a Controlling Financial Interest Contingencies, Loss Recoveries, and Guarantees Contracts on an Entity's Own Equity Convertible Debt Current Expected Credit Losses Debt Distinguishing Liabilities From Equity Earnings … An efficient market implies that . Loans and investments. General questions that companies may be asking include: Financial reporting impacts of coronavirus. BCG 9 discusses the new goodwill impairment model, as well as effective dates and transition. 17, 18 . Our FRD publication on goodwill and intangible assets has been updated to reflect standard-setting activity and to enhance and clarify our interpretive guidance. This guide has been produced by the KPMG International Standards Group (part of KPMG IFRG Limited). Partner, Dept. of Professional Practice, KPMG US. KPMG reports on FASB’s ASU 2017-04 related to ASC 350. Now updated with FAQs, the Hot Topic addresses a company’s need to evaluate the recoverability of goodwill, intangible assets, property, plant and equipment, and lease right-of-use (ROU) assets. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Receive timely updates on accounting and financial reporting topics from KPMG. When it comes to the traditional budgeting season where companies would also be looking into impairment testing of goodwill, "business as usual" would probably be the least likely answer this year. 2 IFRS 3 Business Combinations and IAS 36 Impairment of Assets. 4 Intangible Assets and Goodwill in the context of Business Combinations About this study Recent years have been characterised by continuously high M&A activity with business combinations offering companies a way of increasing and stabilising their Goodwill Impairment: Applying a Simplified Approach 28. © 2020 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Goodwill and intangible assets with indefinite useful lives are not amortised but instead are subject to impairment testing at least annually. Irrespective of any indicator of impairment, IAS 36 requires goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use to be tested for impairment at least annually. of Professional Practice, KPMG US +1 212-954-1086 Using Q&As and examples, this guide explains in depth the impairment models for goodwill, indefinite-lived intangible assets and … 2020 proves to be a challenging year for companies to look through the crystal ball. Handbook: Credit impairment. 3 KPMG’s series The Application of IFRS, which has looked at the following sectors over the past five years: food, drink and consumer goods; chemicals and performance technologies companies; media; mining; oil and gas; power and utilities; retail; telecoms; technology companies. Using Q&As and examples, this guide explains in depth the impairment models for goodwill, indefinite-lived intangible assets and long-lived assets. KPMG can help you to determine how IFRS 16 will change your impairment testing and how to process these changes. Sharing our expertise and perspective. Impairment testing is the process of reviewing the values of assets shown in the balance sheet of a company (known as the 22.angible assets and goodwill Int 81 23. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Pwc.com For more insights on the new goodwill impairment testing standard, please contact PwC to request a meeting. Partner, Dept. Receive timely updates on accounting and financial reporting topics from KPMG. Goodwill and intangible assets with indefinite useful lives are measured at cost, or in some cases at a revalued amount less accumulated impairment charges. • an approach to the impairment testing of goodwill that considers movements in headroom [headroom is the excess of the recoverable amount of a cash-generating unit (or group of units) over the carrying amount of that unit]; and • the requirement in IFRS 3 Business Combinations to recognise identifiable Sharing our expertise and perspective. Observations from the front lines. Accounting guides. What concessions have we provided to our customers? The FASB continues to receive feedback that the goodwill impairment process is costly for preparers, even with recent amendments that were meant to simplify impairment testing. Partially updated in September … Are our customers struggling to pay their obligations or even remain in business? Updating processes and related internal controls in response to the guidance in ASU 2011-08. Partner, Dept. First, you must estimate the fair value of the company (or reporting unit if multiple product lines or divisions exist). Has volatility in commodity prices negatively impacted revenues or production costs? Coronavirus-related impairment of nonfinancial assets. of Professional Practice, KPMG US, Managing Director, Dept. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Investments in Debt Securities 35. The guide also explores the accounting for partial acquisitions, acquisitions achieved in stages, and changes in a reporting entity’s NCI. of Professional Practice, KPMG US +1 212-954-1086 Now updated with FAQs, the Hot Topic addresses a company’s need to evaluate the recoverability of goodwill, intangible assets, property, plant and equipment, and lease right-of-use (ROU) assets. IFRS - Revenue from Contracts with Customers -- IFRS 15 and ASC 606 30. Q4 2020 Quarterly Outlook. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Qualitative Goodwill Impairment Assessment — A Roadmap to Applying the Guidance in ASU 2011-08 This publication addresses considerations related to adopting and performing a qualitative assessment of goodwill impairment in accordance with FASB ASU 2011-08, "Testing Goodwill for Impairment." Impairment testing requires entities to exercise considerable judgement and there is a need to use assumptions that … We can help you to determine the most practical approach on determining your CGUs’ CA and RA post IFRS 16. KPMG observations. IAS 36 applies to a variety of non-financial assets including property, plant and equipment, right-of-use assets, intangible assets and goodwill, investment properties measured at cost and investments in associates and joint ventures 2. [IAS 36.2, 4] Informing your decision-making. Delivering insights to financial reporting professionals. FASB proposes private company alternative for timing of goodwill triggering event assessment. If book value exceeds fair value, goodwill impairment … Establishing and documenting the facts that are relevant to reporting units and goodwill balances. More. Use our Accounting Research Online for financial reporting resources. Other topics covered include common control transactions and pushdown accounting. Impairment of Property, Plant and Equipment and Intangible Assets 32. Equity ‑accounted investees 88 ... Guide to annual financial statements – Illustrative disclosures ... Appendices. Goodwill is being tested for impairment in the annual mandatory impairment testing, without there being an indication of impairment in the underlying CGUs. Are operations being curtailed temporarily, or assets mothballed? A goodwill impairment loss will instead be measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. of Professional Practice, KPMG US, Senior Manager, Dept. In accordance with ASC 320-10-35-10, at the date of transfer, the bank should transfer the security at its fair value, $92 million, which becomes the security’s amortized cost. Identifying reporting units that bypass step 0 and proceed to step 1 of the traditional two-step impairment analysis. Observations from the front lines provides PwC’s insight on current economic issues, our perspective regarding the financial reporting complexities, and what companies should be thinking about to effectively address those issues. Hedge Accounting Qualification 29. A single roadmap to testing nonfinancial assets for impairment – helping you to compare and contrast the different models: Webcast: Impairment of nonfinancial assets, Hot Topic: Coronavirus-related impairment of nonfinancial assets. The ... KPMG’s practical guide to IFRS Standards. Has our stock price significantly decreased? See Appendix D of the publication for a summary of the updates. The FASB’s new goodwill impairment testing guidance—ASU 2017-04, required for public SEC filers for periods beginning after December 15, 2019—while intended as a simplification, could result in less precise goodwill impairments for reporting entities. Informing your decision-making. The Property, plant, equipment and other assets guide discusses the accounting for acquisition transactions determined to be asset acquisitions under US GAAP. 27. A CGU or a group of CGUs to which goodwill has been allocated is being tested for impairment when there is an indication of possible impairment, or 2. In addition, the guide addresses the subsequent accounting for goodwill and indefinite-lived intangible assets. Investment property 86 24. Trigger for impairment testing. the higher of fair value less costs of disposal and value in use). Inventory 34. Delivering insights to financial reporting professionals. Have the circumstances significantly changed how we expect to use our long-lived assets? Goodwill impairment testing guidance: PwC. Have we lost business due to event cancellations, store or facility closures, lower consumer sentiment, etc.? play a role in the timing and magnitude of goodwill impairment recognition. … In-depth accounting guidance for topics of significant interest. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. KPMG does not provide legal advice. In addition, KPMG was the first Big Four valuation practice to adopt the Certified in Entity and Intangible Valuations (CEIV) credential and its mandatory performance framework, which was developed specifically to establish standards in valuing businesses and intangible assets for financial reporting purposes. August 2016 kpmg.com.au KPMG Financial Reporting Insights KPMG’s review of 45 ASX200 entities Operating Segment disclosures © 2020 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. More. Impairment of Goodwill 31. Leases. 3.4.1 Goodwill 62 3.4.2 Cumulative Translation Adjustment and Other Items of Accumulated Other Comprehensive Income 64 3.5 Measuring the Carrying Value of a Disposal Group Upon Classification as Held for Sale 64 3.5.1 Order of Impairment Testing When a Disposal Group Is Held for Sale 66 All rights reserved. For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance. goodwill is tested for impairment: 1. Event. Purpose. of Professional Practice, KPMG US. Have we revised our earnings guidance downwards. Business Combinations Business Combinations — SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S. GAAP Consolidation — Identifying a Controlling Financial Interest Contingencies, Loss Recoveries, and Guarantees Contracts on an Entity's Own Equity Convertible Debt Current Expected Credit Losses Debt Distinguishing Liabilities From Equity Earnings … Financial statement presentation. Fully updated in October 2020. Insight. Latest edition: Our updated guide to CECL, with Q&As, interpretive guidance and examples. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Testing goodwill for impairment requires two steps under U.S. Generally Accepted Accounting Principles (GAAP). The guide also discusses the capitalization of costs, such as construction and development costs and software costs, as well as the subsequent accounting for PP&E, including impairments, depreciation and amortization, and asset … Partially updated in August 2020. Under Ind AS, goodwill arises when there is a business combination and also assets are no longer amortised but tested for impairment annually. FASB ASU eliminates Step 2 of the goodwill impairment test and replaces the qualitative assessment. investors will incorporate price-sensitive information into share prices before they are recorded in financial statements. The COVID-19 outbreak is having a significant impact on global markets and its effects may trigger the need for companies to evaluate the recoverability of nonfinancial assets. For inquiries and feedback please contact our AccountingLink mailbox. KPMG does not provide legal advice. The annual test is required in addition to any impairment tests performed as a result of a … Introduction to Hedge Accounting 33. About this guide. As such, one would usually expect a Have workforce limitations impeded our ability to manufacture products or service our customers? Use our Accounting Research Online for financial reporting resources. impairment-qa\u526f\u672c.pdf - IFRS Who cares about goodwill impairment A collection of stakeholder views April 2014 kpmg.com\/ifrs Contents 01 02 03 04 06 08 3.3 Intangible assets and goodwill 126 3.4 Investment property 139 3.5 Associates and the equity method (Equity-method investees) 146 ... the new credit impairment standard will not be fully effective until 2023. Partner, Dept. Has our supply chain been disrupted so that we cannot procure raw materials or components for finished goods? All rights reserved. For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance. Handbook: Impairment of nonfinancial assets, Updated for recent practice developments and evolving interpretations, Indefinite-lived intangible assets under ASC 350-30, Private company and not-for-profit alternative. Featured - 3 items. 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