Page 276 - SBR Integrated Workbook STUDENT S18-J19

Chapter 18

Impairment of goodwill

6.1 Background

Goodwill is tested annually for impairment.

Goodwill does not generate independent cash flows and so is tested for impairment
as part of a cash-generating unit. For exam purposes, this is normally a subsidiary.

6.2 Impact of NCI

Whether the NCI at acquisition was measured at fair value or
proportionately has a significant impact on the impairment review:

 Fair value method – the group has recognised full goodwill so
this can be added together with the other net assets of the
subsidiary and compared with the recoverable amount.

 Proportionate method – only the group’s share of goodwill has
been recognised, so goodwill must be grossed up to include the
NCI’s share prior to performing the impairment review.

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