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Cash Flows – Impairment of goodwill

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Cash Flows – Impairment of goodwill

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by Stephen Widberg.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • January 10, 2021 at 6:05 pm #605432
    jacobrosenthal
    Participant
    • Topics: 2
    • Replies: 1
    • ☆

    Please remind me (the last video on groups) why the adjustment re impairment of goodwill goes in operational cash flows as opposed to Investment cash flows

    January 11, 2021 at 4:26 pm #605539
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    Impairment (like depreciation) is not a cash flow – it has been deducted in calculating PBT.

    So, like depreciation, it must be added back in order to convert profits into cash flows.

    January 11, 2021 at 6:25 pm #605551
    jacobrosenthal
    Participant
    • Topics: 2
    • Replies: 1
    • ☆

    Seeing as it is an investment in a subsidiary , why is it not added back to investment cash flows?

    January 12, 2021 at 12:49 pm #605601
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    1. It is NOT a cash flow.

    2. It is a CORRECTION – because the profit used in operating cash flows includes non-cash items. Exactly the same logic as depreciation.

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