Impairment of non financial assets

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Xandrea
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Joined: 05 Jul 2021, 08:45

Impairment of non financial assets

Post by Xandrea »

Hi All,

I am assessing an impairment of goodwill. Understand that goodwill is tested for impairment as part of CGU. I have a couple of questions:

a) This goodwill arose from acquisition of a list customers that generate steam A revenue in the past. However, other than corporate/shares assets, such as IT infrastructure, office building etc, there is no heavy asset or equipment required. The revenue arising from stream A coming from a very small division and it represent 3% out of the the total revenue of the company. In this instance, in assessing the impairment of goodwill, is this allow to compare the recoverable amount vs goodwill?

b) Is it acceptable if cash flow projection use to determine the VIU exclude working capital?

c) if the VIU is lower than the carrying amount of goodwill, how do we determine the fair value less cost of sales since there is no market participant in this instance.

Thanks and appreciate your guidance.

Regards
Xandrea Maxime
JRSB
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Re: Impairment of non financial assets

Post by JRSB »

Are you sure that's a business and not purchase of intangible asset?

From what you say FV wouldn't apply so impair down to VIU
amosai
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Joined: 22 Dec 2021, 15:07

Re: Impairment of non financial assets

Post by amosai »

Hi Xandrea,

a) Like JRSB mentioned, you might want to assess if there's an input, process and output of the company you acquired, it could be just an intangible asset whereby the the acquirer allocates the consideration between the individual identifiable assets and liabilities in the group based on their relative fair values at the date of acquisition hence there is no goodwill.

b) It would not be factual to exclude the "maintenance / replacement CAPEX" unless you can justify that the clientele you're servicing does not require significant capex and only requires expertise of just your manpower alone.

c) If there's no market participants as you have mentioned, then it's not possible to measure FV. This is allowed under IAS 36 para 20 to just use VIU.
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Marek Muc
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Re: Impairment of non financial assets

Post by Marek Muc »

This goodwill arose from acquisition of a list customers that generate steam A revenue in the past
I agree with previous comments - doesn't sound like a business combination at all!
Xandrea
Posts: 12
Joined: 05 Jul 2021, 08:45

Re: Impairment of non financial assets

Post by Xandrea »

Thanks all. Will find out more.
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