ASBJ Publishes the Research Paper No.1, Research on Amortisation of Goodwill

19 May 2015

The ASBJ publishes the Research Paper No.1 Research on Amortisation of Goodwill with a view to make a contribution to the global discussion regarding how goodwill should be accounted for.

The Research Paper provides preliminary results of the following research works conducted by the ASBJ Staff:

1. Review of public disclosures regarding the accounting practice of how to determine goodwill amortisation periods under the Japanese accounting standards;
2. Suvery to find recent accounting practices of major Japanese listed companies relating to goodwill amortisation;
3. Limited review of academic literature; and
4. Discussion with financial statements users in Japan regarding their views on the amortisation of goodwill.

Based on the works, the Research Paper, among others, noted the following observations:

1. The review of public disclosures and responses to the survey from major Japanese listed companies indicated that 5 years was often estimated as the amortisation period for many business combinations. However, for goodwill arising from larger scale business combinations, many companies estimated longer periods (such as, 10 years and 20 years) to reflect the longstanding effect that goodwill is expected to have.
2. As a result of the review of academic literature, the ASBJ Staff founds that, at least, it is difficult to immediately conclude that the impairment-only approach is superior to the amortisation and impairment-only approach.
3. The majority of Japanese financial statement users expressed support for the amortisation and impairment approach.

The ASBJ anticipates that this paper will form part of the future work jointly carried out by the ASBJ, EFRAG and the OIC with regard to how goodwill should be accounted for and disclosed. The ASBJ hopes that the Research Paper will help stimulate the global discussion of accounting requirements of goodwill.

Research on Amortisation of Goodwill