Ministry of Finance: The majority of the Advisory Committee on Accounting Standards agreed that goodwill should be amortized instead of impairment testing.
      Recently, the Accounting Standards Committee (ASB) announced the trends of corporate accounting standards.
      Recently, we advised members’ opinion on the issue topic "Goodwill and its impairment" in the Accounting Standards Advisory Forum. Most of the members agreed to the accounting method which reduces the book value of purchased goodwill to zero follow-up to with the consumption of merger benefits.
      There are three reasons:
      Firstly, goodwill conforms to the definition of assets, which means that the purchaser determines the cost it can pay for bringing economic benefits to the enterprise, so its value is depleted.
      Second, when the purchased business gradually realizes with the generation of synergistic effect and the extension of operation time, the goodwill value is also consumed accordingly.
      Third, if we do not reflect the process of goodwill consumption in the financial statements, but abruptly reduce the value of goodwill to zero, it may cause unreal corporate performance in the previous period.
      Feedback from the Advisory Committee on some issues of the IASB Forum is as follows:
      Recently, we have consulted the Advisory Committee on the issue paper "Goodwill and its impairment" in the Accounting Standards Advisory Forum. Now we summarize the opinions of the Advisory Committee as follows:
      Firstly, most of the advisory committees expressed their support in principle for improving the disclosure of mergers discussed at the meetings of the Capital Market Advisory Committee and the Global Preparers Forum, considered that it was necessary to take into account the practical difficulties of financial statement preparers. In determining the disclosure information that needs to be increased, we should combine the cost-benefit principle with the principle of importance, and consider the disclosure of qualitative information such as quantitative information and synergistic effect related to goodwill and its impairment.
      Secondly, most of the Advisory Committee agreed to follow-up accounting treatment to reduce the book value of purchased goodwill to zero with the consumption of merger benefits. There are three reasons: Firstly, goodwill conforms to the definition of assets, which is, the purchaser determines the cost it can pay for bringing economic benefits to the enterprise, so its value is depleted; secondly, when the purchased business gradually realizes with the generation of synergy effect and the extension of operation time, the goodwill value is also depleted accordingly; thirdly, if the process of the gradual consumption of goodwill is not reflected in finance. If the goodwill is suddenly impaired to zero in the report, it may result in untrue corporate performance in the previous period.
      Thirdly, most Advisory members believe that when goodwill no longer reflects the original outsourced goodwill, but includes some endogenous goodwill, the book value of goodwill will be less useful for investors in decision-making. Since goodwill is a special asset, investors cannot identify its value independently. If it also reflects endogenous goodwill, which may increase the difficulty of investors' understanding, making goodwill a black hole in the financial statements, so that the investors cannot use it as one of the important basis for decision-making.

(This article is quoted from daily finance website)