COMMENTARY · GOODWILL & IASB ED
The IASB Exposure Draft on goodwill disclosures proposed changes that still divide opinions. The practical question is what changes in day-to-day work for those testing impairment recurrently.
The Exposure Draft (ED) of the IASB on goodwill disclosures, published in 2024, proposed changes that still divide opinions in the technical community. The CBG technical comment to the ED is published in Insights (Linha 01). The practical question, here, is another: what changes in the day-to-day of who tests impairment of goodwill in Brazilian listed company?
The IASB proposes maintaining annual impairment testing as primary mechanism of monitoring goodwill (rejecting the alternative of returning to systematic amortization), but reinforces three points:
More substantive disclosures on key assumptions of each CGU with goodwill: discount rate, growth rate in extrapolation, sensitivity to changes.
Quantitative information on margin between recoverable value and carrying value, allowing investor to assess proximity to impairment.
Reconciliation between strategic projections (announced to market) and projections used in impairment test, when there is divergence.
For listed company with goodwill, three operational changes:
Less room for "buffer" assumptions. Increased quantitative disclosure of margin between recoverable value and carrying value exposes the buffer the company is using. A company carrying R$ 500 million in goodwill that, every year, shows margin of R$ 800 million on test, will need to explain better why the buffer is so wide (or so narrow).
Greater alignment with strategic communication. Discrepancy between projections of impairment test and projections informed to market in earnings calls becomes more visible. The company that projects 15% EBITDA growth in earnings call cannot use 5% in impairment test without justification.
More work on documentation, less work on calculation. The impairment calculation itself does not change. What changes is the structure of disclosure note and the quality of audit trail behind each assumption. The valuation team will spend more time on documentation than on calculation.
"The ED reinforces what was already best practice: each premise of impairment test must be traceable to verifiable source. The Brazilian companies that have been doing this well will only need to format better. The ones that have not, will need to do more substantive work."
The IASB ED is still under public consultation. Expected timing for issuance of final amendment: 2026/2027. Adoption in Brazil follows through CPC, with technical translation expected for fiscal year following IASB issuance.
For listed company preparing 2026 closing, it is opportunity to anticipate disclosure improvements before they become mandatory. For companies that haven't reviewed impairment methodology recently, it is moment to do so under broader scrutiny lens.