CFA Level I · CFA Level I Exam · Analysis of Long-Term Assets
Under IFRS, goodwill arising in a business combination is most likely:
Under IFRS, goodwill is tested for impairment at least annually rather than amortized. Impairment losses on goodwill are never reversed, even if the cash-generating unit later recovers, so the other two statements describe treatments IFRS does not allow.
- AAmortized over a maximum of 20 years
- BTested for impairment at least annuallyCorrect
- CReversed in income if the cash-generating unit recovers
Explanation
IFRS does not permit amortization of goodwill because its useful life is indefinite. It is tested for impairment at least annually, and impairment losses on goodwill cannot be reversed later.
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