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I have a bit of confusion when I was reading IAS 36. In June 2012, question 4, he wrote off goodwill to zero (after impairing the specific plant) but in one of the examples in the study text, they didn’t write off goodwill to zero in the IAS 36 example. So my confusion is, do we always write off goodwill to zero in an IAS 36 question or do we pro rata it, what is the right treatment?
After impairing any individual asset that can be identified as being impaired, the next to write off is goodwill. If the overall impairment after the individual asset impairment is less than the goodwill, then there will be some goodwill remaining after the impairment.
If goodwill is greater than the impairment necessary after the individual asset has been impaired, then goodwill will be written off in full and, if there still remains an impairment necessary, that will be allocated pro-rata to the remaining assets remembering that no asset should be impaired to an amount less than its recoverable amount
Does that do it for you?
I’m yet confused on how this applies to the Telepath (June 2012 q4) question. Part (b) had total impairment of 5300 and after specific write off of the plant, the remaining impairment is 5300-500 which gives 4800, you say ‘if goodwill is GREATER than the remaining impairment then the goodwill is written off in full’. Goodwill was LESS here (only 1800) compared to the remaining impairment of 4800 so why did Steve write it off in full then?
“If goodwill is greater than the impairment necessary after the individual asset has been impaired, then goodwill will be written off in full and ….” Sorry, this was me trying to answer the question during my lunch break.
The end of the paragraph before that sentence said:-
“If the overall impairment after the individual asset impairment is less than the goodwill, then there will be some goodwill remaining after the impairment.” and should have continued with “If the goodwill is LESS than (I incorrectly said “greater than”) the amount remaining to be impaired, then goodwill will be eliminated in full.
However, if the remaining impairment is Less than the goodwill, there will still be some goodwill left after reducing by the amount of the remaining impairment.
I am sorry for that careless error – that comes from trying to answer these posts in a hurry 🙁
Hope that this post clears up your original post
No problem Mike. I understand that this is a voluntary job you’re doing and you have your full dedication in it so don’t worry, I got everything now. Just hope though an IAS 36 question doesn’t pop up this June, as I hate impairments 🙁
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