CFA Level I · CFA Level I Exam · Analyzing Balance Sheets
An IFRS reporter has a cash-generating unit with a carrying amount of 900 (including goodwill of 100). Fair value less costs of disposal is 680 and value in use is 720. The impairment loss allocated first to goodwill and the total loss are most likely:
Goodwill is written down by 100 and the total impairment loss is 180. Recoverable amount is the higher of fair value less costs of disposal (680) and value in use (720), so loss is 900 − 720 = 180, applied first against goodwill.
- Agoodwill 100; total loss 180Correct
- Bgoodwill 100; total loss 220
- Cgoodwill 80; total loss 180
Explanation
Recoverable amount is the higher of 680 and 720 = 720. Total loss = 900 − 720 = 180. Goodwill is written off first, so 100 goes to goodwill and the remaining 80 is allocated to other assets pro rata. A loss of 220 wrongly uses the lower amount (680).
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