the higher of fair value less costs of disposal and value in use). Under Ind AS, goodwill arises when there is a business combination and also assets are no longer amortised but tested for impairment annually. Updating processes and related internal controls in response to the guidance in ASU 2011-08. 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 KPMG can help you to determine how IFRS 16 will change your impairment testing and how to process these changes. Establishing and documenting the facts that are relevant to reporting units and goodwill balances. Latest edition: Our updated guide to CECL, with Q&As, interpretive guidance and examples. 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. Delivering insights to financial reporting professionals. BCG 9 discusses the new goodwill impairment model, as well as effective dates and transition. Event. 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. An efficient market implies that . [IAS 36.2, 4] General questions that companies may be asking include: Financial reporting impacts of coronavirus. The ... KPMG’s practical guide to IFRS Standards. For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance. IAS 36 seeks to ensure that an entity's assets are not carried at more than their recoverable amount (i.e. Pwc.com For more insights on the new goodwill impairment testing standard, please contact PwC to request a meeting. of Professional Practice, KPMG US, Senior Manager, Dept. Goodwill and intangible assets with indefinite useful lives are not amortised but instead are subject to impairment testing at least annually. Observations from the front lines. Receive timely updates on accounting and financial reporting topics from KPMG. Have workforce limitations impeded our ability to manufacture products or service our customers? 17, 18 . 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. FASB ASU eliminates Step 2 of the goodwill impairment test and replaces the qualitative assessment. Impairment of Property, Plant and Equipment and Intangible Assets 32. 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. Q4 2020 Quarterly Outlook. 22.angible assets and goodwill Int 81 23. Have we revised our earnings guidance downwards. Goodwill and intangible assets with indefinite useful lives are measured at cost, or in some cases at a revalued amount less accumulated impairment charges. About this guide. 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. KPMG does not provide legal advice. Receive timely updates on accounting and financial reporting topics from KPMG. We can help you to determine the most practical approach on determining your CGUs’ CA and RA post IFRS 16. If book value exceeds fair value, goodwill impairment … goodwill is tested for impairment: 1. In addition, the guide addresses the subsequent accounting for goodwill and indefinite-lived intangible assets. • 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 Impairment of Goodwill 31. Trigger for impairment testing. Partner, Dept. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. 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. Informing your decision-making. Informing your decision-making. FASB proposes private company alternative for timing of goodwill triggering event assessment. of Professional Practice, KPMG US, Managing Director, Dept. of Professional Practice, KPMG US. This guide has been produced by the KPMG International Standards Group (part of KPMG IFRG Limited). Financial statement presentation. 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. 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. 2 IFRS 3 Business Combinations and IAS 36 Impairment of Assets. Goodwill is being tested for impairment in the annual mandatory impairment testing, without there being an indication of impairment in the underlying CGUs. Goodwill impairment testing guidance: PwC. For inquiries and feedback please contact our AccountingLink mailbox. Has our supply chain been disrupted so that we cannot procure raw materials or components for finished goods? Partially updated in August 2020. Have the circumstances significantly changed how we expect to use our long-lived assets? 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. 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. Have we lost business due to event cancellations, store or facility closures, lower consumer sentiment, etc.? 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 … Goodwill Impairment: Applying a Simplified Approach 28. Sharing our expertise and perspective. 2020 proves to be a challenging year for companies to look through the crystal ball. More. 27. Delivering insights to financial reporting professionals. Equity ‑accounted investees 88 ... Guide to annual financial statements – Illustrative disclosures ... Appendices. Sharing our expertise and perspective. Insight. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Has our stock price significantly decreased? In-depth accounting guidance for topics of significant interest. Has volatility in commodity prices negatively impacted revenues or production costs? The guide also explores the accounting for partial acquisitions, acquisitions achieved in stages, and changes in a reporting entity’s NCI. Investment property 86 24. Testing goodwill for impairment requires two steps under U.S. Generally Accepted Accounting Principles (GAAP). For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance. 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 investors will incorporate price-sensitive information into share prices before they are recorded in financial statements. What concessions have we provided to our customers? Inventory 34. 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. Coronavirus-related impairment of nonfinancial assets. Are operations being curtailed temporarily, or assets mothballed? No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Introduction to Hedge Accounting 33. 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. Purpose. Fully updated in October 2020. Partially updated in September … Partner, Dept. First, you must estimate the fair value of the company (or reporting unit if multiple product lines or divisions exist). Impairment testing is the process of reviewing the values of assets shown in the balance sheet of a company (known as the Our FRD publication on goodwill and intangible assets has been updated to reflect standard-setting activity and to enhance and clarify our interpretive guidance. 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. 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 … Identifying reporting units that bypass step 0 and proceed to step 1 of the traditional two-step impairment analysis. Use our Accounting Research Online for financial reporting resources. 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. IFRS - Revenue from Contracts with Customers -- IFRS 15 and ASC 606 30. All rights reserved. Leases. of Professional Practice, KPMG US. play a role in the timing and magnitude of goodwill impairment recognition. Are our customers struggling to pay their obligations or even remain in business? 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 … © 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. 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. 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. KPMG observations. 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 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. 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