Impairment of an equity-accounted investment
After applying the relevant IAS 28 requirements, the investment’s entire carrying amount is tested under IAS 36 as a single asset by comparing it with recoverable amount. Goodwill included in that carrying amount is not separately tested. Reversals are assessed under IAS 36 where applicable; do not automatically allocate an impairment to an embedded goodwill component.
Worked example
An associate investment has a carrying amount of $300,000 and recoverable amount of $260,000. If the test is required and no other adjustments apply, recognise an impairment loss of $40,000 against the investment.
Common mistake
Testing and writing down the notional goodwill within the associate investment separately, as though it were consolidated goodwill.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Supporting | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |