In short
Goodwill is tested for impairment at least annually by comparing a reporting unit's fair value with its carrying amount, including goodwill. The impairment loss is the excess of carrying amount over fair value, limited to the goodwill allocated to the unit.
Key takeaways
- An optional qualitative assessment can skip the test if impairment isn't more likely than not.
- The test is also performed when a triggering event occurs between annual tests.
- Goodwill impairment losses are never reversed.
Example
A reporting unit carried at $900,000, including $200,000 of goodwill, has a fair value of $750,000: the impairment is $150,000.
Where it's tested
FAR: Intangible Assets & Goodwill — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A reporting unit has a carrying value of $12,000,000 including allocated goodwill of $3,000,000, and a fair value of $10,500,000. What goodwill impairment loss is recognized?