What you need to know
The Accounting Standards Board’s (AcSB) project is aimed at addressing challenges faced by private enterprises and not-for-profit organizations in recognizing intangible assets acquired in a business combination and the subsequent measurement of goodwill. Preparers highlighted complexities and costs in estimating fair values, along with challenges performing goodwill impairment tests. Initial feedback from the financial statement users of private enterprises and not-for-profit organizations has indicated that the current measurement of goodwill and quantitative information on some intangible assets may not be useful for decision making.
We are seeking your input as we develop the proposals to be included in an exposure draft. Your feedback is crucial to ensure that the proposals will meet the needs of private enterprises and not-for-profit organizations, and result in decision-useful information.
Background
Accounting Standards for Private Enterprises (Part II of the CPA Canada Handbook) currently require entities choosing to consolidate their subsidiaries to separately recognize intangible assets acquired in a business combination at fair value and do not permit the amortization of goodwill.
Under Accounting Standards for Not-for-Profit Organizations (Part III of the Handbook), the accounting treatment of a combination depends on the situation and the entity’s accounting policy choice, leading to the separate recognition of intangible assets and/or goodwill in some cases.
Earlier feedback received by the AcSB regarding the priorities for Part II of the Handbook indicated a strong preference for simplification. More specifically, these simplifications included exploring the elimination of the requirement to separately recognize intangible assets acquired in a business combination and to amortize goodwill. Feedback stressed the burden and cost associated with current practices, particularly for smaller businesses. Following the preliminary feedback heard, the Board added a project to advance its understanding on reporting challenges related to goodwill and intangible assets accounting to its 2023-2024 AcSB Annual Plan. In March 2024, after considering results of its research activities, the Board approved a standard-setting project to develop an exposure draft. The Board plans to conduct public outreach activities in May and June 2024 as it develops the proposals to be included in the exposure draft.
More details
| Key proposals to be explored |
| Allowing entities to amortize goodwill |
- Should goodwill amortization be optional or mandatory?
- How should the amortization period for goodwill be determined?
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Relief from the recognition of intangible assets acquired in a business combination
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- Should this relief be optional or mandatory?
- Should this relief be applied to all or only some intangible assets acquired in a business combination?
- Should this relief be contingent on the entity electing to amortize goodwill?
- What additional information, if any, should be disclosed if relief is applied?
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Have your say
The AcSB welcomes your input on this project. Register now to participate in one of the Board’s public consultation events and share your views.
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