Goodwill Impairment

A reduction in the carrying amount of an asset when its recoverable amount falls below that carrying amount. Under IAS 36, goodwill, indefinite-life intangibles and intangibles not yet available for use are tested every year, other assets only when there is an indication of impairment; under FRS 102 all assets, including goodwill, are tested only on indication.

A reduction in the reported value of an asset on the balance sheet, typically triggered by impairment testing that reveals the asset's carrying amount exceeds its recoverable amount. Goodwill and other intangible asset write-downs often signal that the expected future benefits from a prior acquisition or investment have not materialised.

The excess of the fair value of identifiable net assets acquired over the purchase consideration in a business combination, now termed a bargain purchase gain under current standards. Under IFRS 3, negative goodwill is recognised immediately in profit or loss after the acquirer reassesses the identification and measurement of all assets and liabilities.

An approach to measuring goodwill in a business combination where the acquirer recognises goodwill only in proportion to its ownership interest, rather than attributing goodwill to the non-controlling interest. Under IFRS 3, acquirers have a choice on a transaction-by-transaction basis to measure non-controlling interests either at fair value (full goodwill) or at the NCI's proportionate share of identifiable net assets (partial goodwill).

The smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assets. Under IAS 36, when an individual asset's recoverable amount cannot be estimated in isolation, impairment testing is performed at the CGU level.

In a business context, the natural environment and the regulatory, social, and market conditions within which organisations operate. Environmental considerations have become increasingly material to intangible asset valuation as ESG (Environmental, Social, and Governance) frameworks gain prominence among investors, regulators, and customers.

The IFRS standard that establishes procedures to ensure assets are carried at no more than their recoverable amount — the higher of fair value less costs of disposal and value in use. IAS 36 requires impairment testing whenever there is an indication of impairment, and at least annually for goodwill and intangible assets with indefinite useful lives.

The higher of an asset's (or cash generating unit's) fair value less costs of disposal and its value in use. Under IAS 36, an impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.

What is the accounting treatment for intangible assets with indefinite useful lives?

Indefinite-life intangible assets are not amortised but must be tested for impairment at least annually under IAS 36. They include certain brands, trademarks, broadcasting rights, and perpetual licences with no foreseeable expiration.

What is the difference between amortisation and impairment of intangible assets?

Amortisation systematically allocates cost over the asset's useful life (predictable, planned). Impairment is an unplanned write-down triggered when the asset's carrying amount exceeds its recoverable amount.

What changed with ASU 2017-04 for goodwill impairment testing?

ASU 2017-04 simplified US GAAP goodwill impairment testing by eliminating Step 2 — companies now measure impairment as the excess of carrying amount over fair value of the reporting unit, without needing a hypothetical PPA.