Module V· Goodwill - Subsequent Treatment & ImpairmentIntermediate
Question

How does the annual IFRS goodwill impairment test work?

Answer

Goodwill is allocated to cash-generating units (CGUs). The company compares the CGU's carrying amount with its recoverable amount, which is the higher of value in use and fair value less costs of disposal. If carrying amount exceeds recoverable amount, impairment is recognized. The impairment first reduces goodwill, then other assets if needed.