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CA Final · Financial Reporting · Ind AS 36 Impairment of Assets

Yamuna Retail Ltd. has goodwill allocated to a CGU. An impairment loss was recognised on that goodwill in an earlier year. In the current year the recoverable amount of the CGU has risen substantially. How should the company treat the earlier goodwill impairment loss?

The goodwill impairment loss must not be reversed. Ind AS 36 prohibits reversal of goodwill impairment in later periods, because any recovery in the CGU's value is treated as internally generated goodwill, which cannot be recognised, whatever the reason for the increase.

  1. AIt must not be reversed in a subsequent periodCorrect
  2. BIt is reversed in full in profit or loss
  3. CIt is reversed up to the original cost of goodwill through OCI
  4. DIt is reversed only if the increase arises from a change in discount rate

Explanation

Ind AS 36 prohibits reversal of an impairment loss recognised for goodwill in a subsequent period. Any later increase in the recoverable amount is regarded as internally generated goodwill, which cannot be recognised.

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