• Register
Return to: Home > News > Regulation > ESMA finds limited impairment losses of goodwill

ESMA finds limited impairment losses of goodwill

Significant impairment losses of goodwill among European issuers are limited to only a handful, a report by the European Securities and Markets Authority (ESMA) has found.

The report, European enforcers review of impairment of goodwill and other intangible assets in the IFRS in their report financial statements, looked into the accounting practices of a sample of 235 European issuers with significant amounts of goodwill from 23 countries.

It found €800bn ($1trn) worth of goodwill balances in the 2011 financial statements of issuers with only 5% (€40bn) of that amount are recognised as impairment losses in 2011.

ESMA said the review provides an overview of the accounting practices related to the impairment of goodwill and other intangible assets and helps evaluate the sufficiency of the related disclosures in the 2011 financial statements prepared in accordance with IFRSs.

"Goodwill, and its impairment, are key components in making a realistic evaluation of firms. In that respect ESMA's review will help in providing a more harmonised approach to the disclosure of goodwill impairment under IFRS throughout the European Union," ESMA chair Steven Maijoor said.

In order to improve the overall disclosure provided by issuers, ESMA proposes that issuers should:
- Better specify the key assumptions used in the impairment test;
- Include sensitivity analyses with sufficient detail and transparency, especially in situations when indicators are present that impairment might have occurred;
- Determine the growth rates used to extrapolate cash flows projections based on budgets and forecasts; and,
- Disclose specific discount rates for each material cash-generating unit rather than average discount rates.

Related link
The European Securities and Markets Authority

Top Content

    ARGA team, assemble!

    The new top team has been named that will see in root-and-branch reform at the Financial Reporting Council (FRC) as it transforms into the Audit, Reporting and Governance Authority (ARGA). Will the new duo be as dynamic as some are hoping? Robin Amlôt reports.

    read more

    FASB: a quest for simpler standards

    FASB chair Russell Golden addressed the IMA 2019 Annual Conference and Expo at the Sheraton San Diego Hotel and Marina, California, on 18 June. IMA immediate former chair-emeritus Alex Eng acted as moderator. Joe Pickard reports.

    read more

    The future of audit, and how to get there

    Two recent reports peer into the future of the audit profession. One analyses what an audit should offer, while the other looks at how the audit process will be carried out. Robin Amlôt takes a closer look at both.

    read more

    EFAA elects new president, focuses on digital future

    EFAA’s new president, Salvador Marin, outlined his key priorities for the next two years at the organisation’s 2019 annual general meeting, while outgoing president Bodo Richardt offered advice. Robin Amlôt reports.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.