The institute argued the ‘impairment only’ regime on goodwill – which would replace traditional amortisation in the International Accounting Standards Board’s proposed new rule – raised ‘grave concern’ and would cost small businesses far too much. ‘The proposed annual impairment test goes way over the top. For most smaller companies, the costs will outweigh any possible benefit.
We strongly recommend the board retains amortisation for cases where their complex routine is not justified,’ said Andy Simmonds, chairman of the institute’s working party.
Amortisation of goodwill has come under attack because, in the nineties, companies tended to pay too much for acquisitions. In many cases their current amortised value is still too high compared to the companies’ own value on deflated stock markets.
The ICAEW acknowledged problems associated with the amortisation of goodwill, but concluded that the impairment-only approach did not achieve an acceptable balance between ‘representational faithfulness’ and practicality. ‘This approach is appropriate only where two conditions exist: firstly, goodwill can be shown not to have a finite life; and secondly, the prescribed impairment test can be shown to be both reliable and justified in terms of cost/benefit,’ the ICAEW wrote to the IASB.
The Financial Reporting Council has issued guidance regarding the annual reporting of 1,200 large and smaller listed companies. The letter highlighted the key issues and improvements that can be made in the 2016 reporting season
Baldwins Accountancy Group has continued investment in the north-east and appointed David Fish as a director in its corporate finance team
UK M&A activity bounced back strongly in July and August, according to analysis by the deals practice at PwC.
Smith & Williamson has added Jim Clark and Philip Marsden, of Marsden Clark Corporate Finance Limited, to its corporate finance team.