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Solution
The fair value less costs to sell is $(20 - I) million,
or
$19 million.
The value-in-use is $(26 - 8) million,
or
$18 million.
The carrying value is $(28 - 8) million, or $20 million.
Therefore, the recoverable amount ($19 million) is less than its carrying value ($20 million), and the as–
set is impaired.
10.7
A cas h-ge nerating unit to whic h goodwill has been allocated will be tested for impairment
annually and also when there is an indication that the un it might be impaired.
11. GOODWILL
11.1
Goodwill that rel ates to minority interests is not recogni zed currently in the paren t' s co nso li–
dated fi nancial sta tements . Part of the recoverable amount of a cash-genera ting unit is attributable
to the minority' s interest in goo dw ill.
11.2
For the purpose of imp airment testing, the carrying amount of goo dwill is grossed up to in–
cl ude the goo dw ill attributable to the mi nority interest. Th is noti on all y adj usted figure is then com–
pared with the recoverable amount of the unit to dec ide whe ther the cas h-ge nera ting unit is
impaired .
Case Study 9
Facts
An entity (A) acquires 60% of the ownership interest in another entity (B). The goodwill arising on ac–
quisition was $24 million, and the carrying value of entity B' s net assets in the consolidated financial
statements is $60 million at December 31, 20X5. The recoverable amount of the cash-generating unit B
is $80 million at December 31, 20X5.
Required
Calculate any impairment loss arising at December 31, 20X5, for the cash-generating unit B.
Solution
Carrying amount
Unrecognized minority interest
Notionally adjusted carrying amount
Recoverable amount
Impairment loss
Goodwill
$ilL
24
lQ
40
Net assets
1!!L
60
60
Total
1m
84
...l.Q.
100
i.8ill
W
This impairment loss will reduce goodwill on acquisition to $12 million ($24 - 60% of20 million).
12. TIMING OF IMPAIRMENT TEST
12.1
The annual imp airment test for the cas h-ge nerating unit can be performed at any time during
the fin ancial year, provided the test is carried out at the same time every year.
12.2
Different ca sh-ge nerating units can be tested for imp airment at different times of the year.
Th e exception to this is where the cas h-ge nerating unit was ac quired in a bu siness combination
du ring the curre nt period. In thi s case, the unit shall be test ed for imp airment before the end of the
current financial year.
13.
GROUP OR DIVISIONAL ASSETS (CORPORATE ASSETS)
13.1
Corporate ass ets should be allocated to cas h-ge nerating un its. If the asset ca n be allocated on
a reasonable and con sistent basis, there is no problem.
13.2
(I)
However, if the asset ca nnot be allocated on such a bas is, then three processes should occ ur:
An impairment tes t should be carried out on the cash-generating unit without the corporate
asset.