Monday, 21st January, 2013: The European Securities and Markets Authority (“ESMA”), has published a review of 2011 IFRS financial statements related to impairment testing of goodwill and other intangibles - and other tangible assets. The review, which looked into the accounting practices of a sample of 235 European issuers from 23 countries, found €800bn (€790bn in 2010) worth of goodwill balances in the 2011 financial statements of issuers, with 5% (c. €40bn) of that amount recognised as impairment losses in 2011.
The report shows that significant impairment losses of goodwill were limited to a handful of issuers, mostly in the financial services (€19.2bn) and telecommunication industry (€9.7bn). The report raises the question as to whether the level of impairment disclosed in 2011 financial reports appropriately reflects the difficult economic operating environment for companies. Although the major disclosures related to goodwill impairment testing were generally provided, in many cases these were of the boilerplate variety and not entity-specific.
ESMA expects issuers and their auditors to consider the findings of this review when preparing and auditing their IFRS financial statements.
IAASA conducted the work on the Irish issuers that were selected for review. The Report can be accessed here.