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Goodwill and revenue

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Goodwill and revenue

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by Kim Smith.
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  • August 18, 2019 at 3:27 am #527905
    foeldh123
    Participant
    • Topics: 168
    • Replies: 76
    • ☆☆☆

    May i ask why goodwill is assumed to be impaired when revenue has decreased from the last year ?

    Thank you

    August 18, 2019 at 8:22 am #527936
    Kim Smith
    Keymaster
    • Topics: 138
    • Replies: 8443
    • ☆☆☆☆☆

    I’m not aware that it is an “assumption”. However, future earnings / revenue stream will usually be a significant factor in determining the purchase price of a business and hence the consideration paid for goodwill (excess over tangible net assets). So revenue less than forecast would most likely be an indicator of impairment.

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