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CFA Institute Report Highlights Investor Views on Goodwill Accounting and the Importance of a Global Approach

Investors Want Improved Disclosures, Rather Than Revert to Amortization

New York City, United States 07 Dec 2021

CFA Institute, the global association of investment professionals, calls for a global approach to goodwill accounting, as diverging accounting standards could cause significant loss in global comparability for investors, should amortization get the go-ahead from U.S. standard setters.

The International Accounting Standards Board (IASB), for International Financial Reporting Standards (IFRS), and the Financial Accounting Standards Board (FASB), for U.S. Generally Accepted Accounting Standards (U.S. GAAP), are reexamining goodwill accounting, and, specifically, the measurement of goodwill post-acquisition. The IASB is pursuing improved disclosures while the FASB is considering reverting to amortization. A return to amortization in accounting for goodwill would have significant implications for investors in the United States and globally, given the size of goodwill balances across the world. 

A survey of CFA Institute members demonstrated an almost unanimous preference from investors for a unified global approach, with a majority favoring improving disclosures over reverting to amortization. The survey findings are included in a new report: Goodwill: Investor Perspectives, Improve Disclosures, Rather Than Revert to Amortization.

CFA Institute gathered 2019 goodwill balances[i] for some of the world’s largest economies. In the United States, corporations in the S&P 500 had USD3.5 trillion of goodwill in 2019, which represents 42.2 percent of the equity and 9.3 percent of the assets of such companies. Goodwill for all U.S. public companies was USD5.6 trillion in 2018[ii] and represented 40.5 percent of equity and 7.7 percent of the assets of those public companies with goodwill. Goodwill balances of the largest corporations in the United Kingdom, Europe and Canada – jurisdictions following IFRS – ranged from 21-41 percent of equity in 2019. Amortizing goodwill for U.S. companies following U.S. GAAP would have significant implications on net income, equity and assets of such companies, and their comparability with companies around the globe that apply IFRS standards

Sandra J. Peters, CFA, Senior Head, Global Financial Reporting Advocacy, CFA Institute said:

“The size of goodwill balances around the globe highlight why the debate about the subsequent measurement of goodwill must go beyond a discussion of accounting theory alone, as divergent solutions by the IASB and FASB will create significant comparability issues for investors. A majority of investors prefer retaining impairment only accounting, while improving disclosures over reverting to amortization. Amortization, even when done with impairment testing, will not improve financial reporting as it mutes impairment testing while increasing costs and simultaneously decreasing the decision-usefulness of financial statements. The IASB’s disclosure approach will allow investors to better evaluate acquisitions, and facilitate the market assessment of impairment testing, thereby improving financial reporting.”

Paul Andrews, Managing Director for Research, Advocacy, and Standards at CFA Institute adds:

“Earlier this year, IOSCO[[i][ii]] called for greater collaboration between the accounting boards so as to maintain the alignment of IFRS and U.S. GAAP. Our survey shows investors’ agree, and thus we call for a unified approach for goodwill accounting.” 

Survey Key Findings

  • Make sure the path forward is globally consistent:
    • Investors wish to see a unified approach for goodwill from policymakers, with 94 percent believing the IASB and FASB should follow the same approach in the subsequent measurement of goodwill.
  • Improve disclosures, rather than revert to amortization:
    • Most investors (58 percent), believe impairment testing should be retained – rather than reverting to amortization – but seek better disclosures that facilitate the assessment of post-acquisition deal performance;
    • Investors report that current goodwill and impairment disclosures are not useful (70 percent), they want improvement in disclosures before any changes in impairment accounting (66 percent), and they want improvement in such disclosures irrespective of any change in accounting (88 percent);
    • Investors believe goodwill is an asset (75 percent), that it can have wasting and non-wasting elements (77 percent), and that it doesn’t necessarily decrease in value over time (53 percent). Amortization presumes goodwill is a fully wasting asset, whereas impairment allows for wasting and non-wasting elements over time;
    • Investors recognize timeliness of goodwill impairments could be improved (72 percent), but believe impairment still provides decision-useful information, confirms underperformance (73 percent), holds management accountable (80 percent) and that eliminating impairment would result in loss of information to investors (77 percent).Investors believe disclosures will facilitate greater transparency and improve timeliness of impairment testing by allowing investors to understand acquisition performance and hold management accountable;
    • Most investors, 73 percent, are willing to bear the cost of impairment testing. While understanding amortization would come with impairment testing, investors also recognize amortization would mute impairment testing, leaving it a costly compliance exercise.
    • While amortization may be administratively convenient for preparers, it does not allow for discernment of good vs. bad managers (61 percent), distorts financial metrics (63 percent), and does not provide decision-useful information for investment analysis.
    • Amortization increases costs but provides no benefit or improvement in financial reporting for investors.
    • In order of priority, investors want to see improved disclosures concerning:
      • Valuation models and related estimates and assumptions;
      • Quantitative information on acquisition performance over time, relative to original business objectives;
      • Key common performance metrics used by management to monitor the acquisition;
      • Quantitative and qualitative information on deal performance;
      • More information on how the board assessed the acquisition’s performance over time.
  • Taken together, investors support the IASB approach:
    • Focusing on enhancing disclosures is more consistent with investor perspectives.


For further information, please contact [email protected]


Notes to Editors

Goodwill: Investor Perspectives, Improve Disclosures, Rather Than Revert to Amortization surveyed a random sample of 23,800 CFA® charterholders employed as research, investment, or quantitative analysts or portfolio managers. The survey, deployed during the period 5-15 November 2020, asked about the accounting for goodwill, the related disclosures, and how these issues are affecting analysis and investment decision-making. A total of 1,607 individuals completed the survey and yielded a useable response rate of 7 percent.

In 2020, CFA Institute issued a Comment Letter responding to the FASB’s consultation concerning Identifiable Intangible Assets and Subsequent Accounting for Goodwill, and a Comment Letter responding to the IASB’s consultation Business Combinations – Disclosures, Goodwill and Impairment. 

The complete report Goodwill: Investor Perspectives, Improve Disclosures, Rather Than Revert to Amortization is available here.

  1. Drawing on FactSet Data, CFA Institute gathered the size of goodwill balances for the 16 largest stock market indices globally. To enable the most complete analysis, data for 2019 was used. CFA Institute computed goodwill as a percentage of total assets and total equity, as well as computing the total equity less goodwill, and identified the number and percentage of companies with negative equity after deducting goodwill for all companies within the respective indices. See Chart 2 in the Goodwill Report. 

  1. See Chart 1 in the Goodwill Report.  A reversion to amortization would result in the write-off to the order of 40.5 percent of equity either immediately, or by USD550 billion a year for each of the next 10 years, under the FASB contemplated approach.

  2. IOSCO Statement on Enhancing Collaboration between the IASB and the FASB on Accounting for Goodwill




About CFA Institute

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 175,000 CFA® charterholders worldwide in more than 160 markets. CFA Institute has nine offices worldwide and 160 local societies. For more information, visit www.cfainstitute.org or follow us on LinkedIn and Twitter at @CFAInstitute.

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