Hi guys!
On F2-22 of Becker, the IFRS rule for an impairment loss of an intangible asset other than goodwill is calculated as comparing the intangible asset's carrying value to the recoverable amount. IFRS defines the recoverable amount as the greater of the asset's fair value less costs to sell and the asset's value in use.
Now take a look at this Becker MCQ question:
On December 31, an entity tested its goodwill for impairment and determined the following for one of its cash-generating units:
Carrying value $ 2,425,000
Fair value 2,600,000
The entity estimated that if it were to sell the cash generating unit, it would incur costs of $250,000. The entity also determined that the present value of the future cash flows expected from the cash generating unit is $2,400,000. The cash generating unit reports goodwill of $65,000. What is the goodwill impairment loss that will be reported on the December 31 income statement under IFRS?
The correct answer is $25,000 and the explanation according to Becker is
Under IFRS, the goodwill impairment test is a one-step test in which the carrying value of a cash-generating unit (CGU) is compared to the CGU's recoverable amount, which is the greater of the CGU's fair value less costs to sell and its value in use (PV of future cash flows expected from the CGU). For this CGU, the value in use of $2,400,000 is the recoverable amount because it exceeds the fair value less costs to sell of $2,350,000 ($2,600,000 fair value - $250,000 costs to sell) and the impairment loss is:
Impairment loss = Recoverable amount - Carrying value
Impairment loss = $2,400,000 - $2,425,000 = $(25,000)
However on page F2-22, I thought this rule is only used for intangible assets other than goodwill......but the rule is used here for goodwill.
Thanks for your help! :)