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Hi sir, was doing the past year paper March/June 2018, when i stumble upon question 1. In the answer, working 1 – goodwill on acquisition of Butter, they proceeded to do an impairment of 35.2, even though the information was discovered after the measuring period (1 year after the acquisition date) which IFRS 3 stated that goodwill should not be recalculated and any changes would be considered post acquisition adjustment. Did I get thing misunderstood ? Sorry if it’s a rather dumb question.
Hi,
There’s never a dumb question, so don’t worry.
An impairment is not a recalculation of goodwill, the goodwill at acquisition remains the same calculation, but we are now looking to see if it has fallen in value. This impairment test will be done on an annual basis.
What you are referring to is where the net assets measured at the acquisition date may have changed in value as we initially used a provisional value. If this figure changes within a year then we can adjust the goodwill but if not then we have to make the adjustment through retained earnings.
Thanks
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