IFRS 3 has introduced a new concept into accounting for purchased goodwill – annual impairment testing, rather than amortisation. Consider the effect of a change from amortisation of goodwill (in IAS 22) to impairment testing and no amortisation in IFRS 3, and in particular:

● The effect on the financial statements;

● The effect on financial performance ratios;

● The effect on the annual impairment or amortisation charge and its timing;

● Which method gives the fairest charge over time for the value of the goodwill when a business is acquired;

● Whether impairment testing with no amortisation complies with the IASB’s Conceptual Frame-work for Financial Reporting issued in March 2018;

● Why there has been a change from amortisation to impairment testing – is this pandering to pressure from the US FASB and/or listed companies? (How would we evaluate these possibilities?)