Skip to content

ACCA Applied Knowledge · Financial Accounting · Intangible non-current assets and amortisation

Alder Co acquired 100% of Birch Co for $900,000 cash. At the acquisition date the fair value of Birch's identifiable net assets was $750,000. One year later, goodwill is tested and found to have a recoverable amount of $110,000. What impairment loss is recognised in respect of goodwill?

The impairment loss is $40,000. Goodwill on acquisition was $150,000 ($900,000 less $750,000 net assets). Its recoverable amount is $110,000, so the carrying amount is written down by the $40,000 difference through profit or loss.

  1. A$40,000Correct
  2. B$150,000
  3. C$0
  4. D$110,000

Explanation

Goodwill = 900,000 - 750,000 = 150,000. Recoverable amount is 110,000, so impairment = 150,000 - 110,000 = 40,000. Charging 110,000 would wrongly treat the recoverable amount as the loss.

Did you get it right without looking?

One question tells you little. A timed set on Intangible non-current assets and amortisation shows your real accuracy, how long you take and where you lose marks.

Practise Intangible non-current assets and amortisationFree diagnostic mock

More Intangible non-current assets and amortisation questions