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
Impairment of non financial assets
Re: Impairment of non financial assets
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
From what you say FV wouldn't apply so impair down to VIU
Re: Impairment of non financial assets
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.
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.
Re: Impairment of non financial assets
I agree with previous comments - doesn't sound like a business combination at all!This goodwill arose from acquisition of a list customers that generate steam A revenue in the past
Re: Impairment of non financial assets
Thanks all. Will find out more.