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In March 2020, the International Accounting Standards Board (“IASB”) issued a Discussion Paper Business Combinations – Disclosures, Goodwill and Impairment (“DP”) which contains the IASB’s preliminary views on changes that should be made to business combination disclosures and the goodwill impairment test. The proposed changes would apply to all entities that use IFRS to prepare their financial statements, including public and private entities, not-for-profit organizations, government business enterprises, government business partnerships and other government organizations.
The objective of the IASB’s project is to improve the information entities provide, at a reasonable cost, to existing and potential investors, and lenders and other creditors, about their business combinations so that investors can more effectively hold an entity’s management to account for their decisions to acquire businesses. The IASB also considered changes which would reduce the cost and complexity of the impairment test for cash-generating units (“CGUs”) containing goodwill.
The IASB is seeking feedback from stakeholders to decide whether there is compelling evidence that changes to IFRS are necessary and would justify the cost of change. The comment period will end on December 31, 2020.
Specifically, the DP states that the IASB’s preliminary views are that it should develop proposals to:
The IASB believes that it cannot design a different impairment test for CGUs that is significantly more effective than the impairment test in IAS 36 Impairment of Assets at recognising impairment losses on goodwill on a timely basis and at a reasonable cost.
The IASB’s preliminary view is that it should not reintroduce amortisation of goodwill or change the range of identifiable intangible assets recognised separately from goodwill in a business combination.
The full history of this IASB project, including related supporting materials, can be accessed here.
For more information on the financial reporting library, contact a local MNP Assurance Professional, or Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of August 31, 2020. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2020. All rights reserved.
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