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Financial Reporting · Ind AS 36 Impairment of Assets

Goodwill and Non-Controlling Interest Impairment under Ind AS 36

Updated 5 October 2026 · Fact-checked

Goodwill is allocated to the CGUs expected to benefit from the combination and tested for impairment every year, with no reversal later. Compare the unit's carrying amount with its recoverable amount. If NCI was measured at its share of net assets, gross up goodwill first. Any loss reduces goodwill first, then other assets pro rata.

Understand Goodwill and Non-Controlling Interest Impairment

Goodwill from a business combination cannot generate cash flows on its own. So Ind AS 36 does not test it alone. You test it as part of a cash-generating unit (CGU), or a group of CGUs, that is expected to benefit from the synergies of the combination.

From the acquisition date, you allocate goodwill to each CGU or group of CGUs expected to benefit. This applies even if no other assets or liabilities of the acquiree are assigned to that unit. The unit to which goodwill is allocated should be the lowest level at which management monitors goodwill for internal purposes. It must not be larger than an operating segment before aggregation under Ind AS 108. If the initial allocation cannot be completed by the end of the year of acquisition, you complete it before the end of the first annual period that begins after the acquisition date.

Goodwill, intangible assets with an indefinite useful life and intangible assets not yet available for use must be tested for impairment every year, whether or not there is any indication of impairment. You may do the test at any time during the year, but you must do it at the same time every year. Different units can be tested at different times. Other assets are tested only when an indicator exists. Also test the unit whenever there is an indicator.

The test compares the carrying amount of the CGU (including allocated goodwill) with its recoverable amount, which is the higher of fair value less costs of disposal and value in use. If the carrying amount is higher, the difference is an impairment loss. You reduce goodwill first. Then you reduce the other assets of the unit pro rata to their carrying amounts. No asset may be reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. Any amount not allocated because of this floor goes to the other assets pro rata. An impairment loss on goodwill is never reversed.

NCI creates one more step. Under Ind AS 103 you can measure NCI at fair value (full goodwill) or at its proportionate share of identifiable net assets (partial goodwill). With full goodwill, the books already hold all of the goodwill, so you test the unit as it stands. With partial goodwill, the books hold only the parent's goodwill. The recoverable amount of the unit covers 100% of the business. So you first gross up goodwill for the NCI's notional share, and only then compare. Of any goodwill loss, only the parent's share is recognised, because NCI goodwill was never recorded.

Key rules to remember

Impairment loss of a CGU
Impairment loss = Carrying amount of CGU (incl. goodwill) − Recoverable amount, if positive
Recoverable amount = higher of fair value less costs of disposal and value in use.
Gross-up of goodwill (partial goodwill method)
Notional total goodwill = Goodwill recognised ÷ Parent's ownership %; Notional NCI goodwill = Notional total − Recognised
Needed only when NCI is measured at its proportionate share of net identifiable assets. Add the notional NCI goodwill to the unit's carrying amount for the test.
Allocation order of a CGU loss
1st: reduce goodwill. 2nd: reduce other assets pro rata to carrying amounts
No asset goes below the highest of its fair value less costs of disposal, its value in use (if determinable) and zero. Redistribute any excess to the other assets pro rata.
Loss shared with NCI
Loss on full goodwill is shared between parent and NCI in the ratio in which profit or loss is shared
In the partial goodwill case, the part of the goodwill loss relating to notional NCI goodwill is not recognised.
Frequency and reversal
Goodwill, indefinite-life and not-yet-available intangibles: test every year. Goodwill impairment: no reversal
Other assets are tested on indication, and their losses can be reversed except for goodwill.

How to solve Goodwill and Non-Controlling Interest Impairment questions

Use this order for any question on goodwill impairment, with or without NCI.

  1. 1Identify the CGU or group of CGUs to which goodwill is allocated. If the question gives several units, allocate goodwill on the basis stated (benefit from synergies, relative values or as given).
  2. 2Find how NCI was measured: fair value (full goodwill) or proportionate share of net assets (partial goodwill).
  3. 3If it is partial goodwill, gross up: divide recognised goodwill by the parent's %, and add the notional NCI goodwill to the unit's carrying amount. If it is full goodwill, skip this step.
  4. 4Compute the carrying amount of the unit: identifiable assets and liabilities at year-end carrying amounts (including fair value uplift net of depreciation) plus goodwill. Include any allocated corporate assets if the question says so.
  5. 5Compute the recoverable amount: the higher of fair value less costs of disposal and value in use. Compare. If the carrying amount is not higher, there is no impairment.
  6. 6Allocate the loss: goodwill first, then other assets pro rata to carrying amounts, respecting the floor for each asset.
  7. 7If NCI exists, split the loss. Partial goodwill: recognise only the parent's share of the goodwill loss. Full goodwill: share the loss in the profit-sharing ratio.
  8. 8Show the final carrying amounts and state the journal entry: Impairment loss (P&L) Dr, to Goodwill / Assets Cr.

Quickest way: Gross-up and compare in four lines

When to use it: Use when the question gives a subsidiary with NCI at proportionate share and asks only for the impairment loss and the amount recognised.

  1. Line 1: Net assets carrying amount + recognised goodwill ÷ parent's % = adjusted carrying amount.
  2. Line 2: Adjusted carrying amount − recoverable amount = total loss.
  3. Line 3: If the loss is within the grossed-up goodwill, it all goes to goodwill. Recognised loss = total loss × parent's %.
  4. Line 4: Closing goodwill = recognised goodwill − recognised loss. If the loss exceeds the grossed-up goodwill, charge the excess to other assets pro rata and check the floors.

Common mistakes in Goodwill and Non-Controlling Interest Impairment

  • Comparing the unit's recoverable amount with a carrying amount that has no NCI goodwill, in the partial goodwill case.

    The recoverable amount covers 100% of the business, but the books show only the parent's goodwill, so the two sides are not like for like.

    Fix: Gross up goodwill by dividing it by the parent's percentage. Add the notional NCI goodwill to the carrying amount before comparing.

  • Recognising the whole grossed-up loss in the consolidated books.

    Students forget that the notional NCI goodwill was never recorded.

    Fix: Recognise only the parent's share of the goodwill loss when NCI is at proportionate share. Any loss on other assets is recognised in full.

  • Spreading the loss pro rata over all assets including goodwill.

    Students remember pro rata but forget the order.

    Fix: Reduce goodwill to zero first. Only the balance goes to other assets, pro rata to carrying amounts.

  • Reducing an asset below its fair value less costs of disposal.

    The floor rule is skipped in the rush.

    Fix: After allocating, check each asset against its floor. Cap the reduction and push the excess to the remaining assets pro rata.

  • Reversing a goodwill impairment loss in a later year when the recoverable amount recovers.

    Students apply the reversal rule for other assets to goodwill.

    Fix: Goodwill impairment is never reversed. Reversal of other assets in the unit is allowed, but not above what their carrying amount would have been without the loss.

  • Testing goodwill only when an indicator exists.

    Students mix up the rule for ordinary assets with the rule for goodwill.

    Fix: Test goodwill, indefinite-life intangibles and intangibles not yet available for use every year. Do it at the same time each year.

Worked examples

Example 1

Case: P Ltd acquired 80% of S Ltd and measured NCI at its proportionate share of identifiable net assets. Goodwill recognised on consolidation is ₹40,00,000, all allocated to S Ltd as one CGU. At the year end, the carrying amount of S Ltd's identifiable net assets (after fair value adjustments and depreciation) is ₹3,00,00,000. The recoverable amount of S Ltd is ₹3,20,00,000. Compute the impairment loss to be recognised in the consolidated financial statements and the closing goodwill.

Show the solution
  1. NCI is at proportionate share, so goodwill must be grossed up.
  2. Notional total goodwill = ₹40,00,000 ÷ 80% = ₹50,00,000. Notional NCI goodwill = ₹50,00,000 − ₹40,00,000 = ₹10,00,000.
  3. Adjusted carrying amount of the CGU = ₹3,00,00,000 + ₹50,00,000 = ₹3,50,00,000.
  4. Recoverable amount = ₹3,20,00,000. Total loss = ₹3,50,00,000 − ₹3,20,00,000 = ₹30,00,000.
  5. The loss is less than the grossed-up goodwill of ₹50,00,000, so all of it is allocated to goodwill. Other assets are not reduced.
  6. Only the parent's share is recognised, because NCI goodwill is not in the books. Recognised loss = ₹30,00,000 × 80% = ₹24,00,000. The remaining ₹6,00,000 relates to notional NCI goodwill and is not recognised.
  7. Closing goodwill = ₹40,00,000 − ₹24,00,000 = ₹16,00,000.

Answer: Impairment loss recognised in the consolidated statements is ₹24,00,000, all against goodwill. Closing goodwill is ₹16,00,000. The ₹6,00,000 loss on notional NCI goodwill is not recognised.

Example 2

Case: H Ltd owns 70% of K Ltd and measured NCI at fair value, so full goodwill is recorded. Profits are shared 70:30. K Ltd is one CGU with these carrying amounts: goodwill ₹20,00,000, Plant A ₹50,00,000, Plant B ₹30,00,000, total ₹1,00,00,000. The recoverable amount of the CGU is ₹65,00,000. The fair value less costs of disposal of Plant B is ₹28,00,000. Allocate the impairment loss and show how it is shared between H Ltd and NCI.

Show the solution
  1. Because NCI is at fair value, no gross-up is needed. Total loss = ₹1,00,00,000 − ₹65,00,000 = ₹35,00,000.
  2. Reduce goodwill first by ₹20,00,000 to nil. The balance of the loss is ₹15,00,000.
  3. Allocate ₹15,00,000 pro rata to Plant A and Plant B in the ratio 50:30 = 5:3. Plant A gets ₹9,37,500. Plant B gets ₹5,62,500.
  4. Check the floor for Plant B: ₹30,00,000 − ₹5,62,500 = ₹24,37,500, which is below its fair value less costs of disposal of ₹28,00,000. Limit Plant B's reduction to ₹2,00,000.
  5. The unallocated ₹3,62,500 (₹5,62,500 − ₹2,00,000) goes to Plant A. Plant A's total reduction = ₹9,37,500 + ₹3,62,500 = ₹13,00,000.
  6. Check: ₹20,00,000 + ₹13,00,000 + ₹2,00,000 = ₹35,00,000.
  7. Closing carrying amounts: goodwill nil; Plant A ₹50,00,000 − ₹13,00,000 = ₹37,00,000; Plant B ₹28,00,000. Total = ₹65,00,000, which equals the recoverable amount.
  8. Sharing of loss: H Ltd 70% × ₹35,00,000 = ₹24,50,000. NCI 30% × ₹35,00,000 = ₹10,50,000.

Answer: Total impairment loss is ₹35,00,000: goodwill ₹20,00,000, Plant A ₹13,00,000, Plant B ₹2,00,000. H Ltd bears ₹24,50,000 and NCI bears ₹10,50,000. The CGU is carried at ₹65,00,000.

Exam tips

  • Read how NCI is measured before you start. Proportionate share means gross-up. Fair value means no gross-up. Many marks are lost here.
  • Show the grossed-up carrying amount as a separate line in your working. Examiners give marks for the method even if the final figure is off.
  • In allocation questions, state the order (goodwill first, then pro rata) and check the floor for each asset. Show the check in one line.
  • In theory questions, give four points: allocation to CGUs that benefit from synergies, no larger than an operating segment, annual test at the same time each year, and no reversal of goodwill loss.
  • Case MCQs often ask which assets need an annual test. Pick goodwill, indefinite-life intangibles and intangibles not yet in use, and reject ordinary PPE with no indicator.

Practice questions from Ind AS 36 Impairment of Assets

Goodwill and Non-Controlling Interest Impairment in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Goodwill and Non-Controlling Interest Impairment: frequently asked questions

Why is goodwill tested every year when other assets are not?

Goodwill does not generate cash flows on its own and is not amortised. So there is no gradual write-off to reflect its decline. Ind AS 36 therefore requires a yearly test, whether or not an indicator exists. The same applies to indefinite-life intangibles and intangibles not yet available for use.

How do I allocate goodwill to a CGU under Ind AS 36?

Allocate it to each CGU or group of CGUs expected to benefit from the synergies of the combination. This applies even if the acquiree's other assets are not assigned to that unit. The unit should be the lowest level at which management monitors goodwill, and not larger than an operating segment. If the question gives relative values or benefits, use them as the basis.

Why do we gross up goodwill when NCI is at proportionate share?

The recoverable amount of the CGU relates to the whole business, including the NCI's part. The books carry only the parent's goodwill. Grossing up makes the carrying amount comparable to the recoverable amount. Only the parent's share of any goodwill loss is then recognised.

Can I reverse a goodwill impairment loss if the business recovers?

No. Goodwill impairment losses are never reversed. Losses on other assets of the unit can be reversed if the estimates change, but only up to the carrying amount that would have existed without the loss.