Accounting Standards 1-29 - Seth & Associates

liabilities that have already been recognised in the financial statements (for
example, payables, pensions and other provisions). In such cases, the carrying
amount of the cash-generating unit is increased by the carrying amount of
those assets and decreased by the carrying amount of those liabilities.
Goodwill
78. In testing a cash-generating unit for impairment, an enterprise should
identify whether goodwill that relates to this cash-generating unit is
recognised in the financial statements. If this is the case, an enterprise
should:
a. perform a ‘bottom-up’ test, that is, the enterprise should:
i. identify whether the carrying amount of goodwill can be
allocated on a reasonable and consistent basis to the
cash-generating unit under review; and
ii. then, compare the recoverable amount of the cashgenerating
unit under review to its carrying amount
(including the carrying amount of allocated goodwill, if
any) and recognise any impairment loss in accordance
with paragraph 87.
The enterprise should perform the step at (ii) above even
if none of the carrying amount of goodwill can be
allocated on a reasonable and consistent basis to the
cash-generating unit under review; and
b. if, in performing the ‘bottom-up’ test, the enterprise could not
allocate the carrying amount of goodwill on a reasonable and
consistent basis to the cash-generating unit under review, the
enterprise should also perform a ‘top-down’ test, that is, the
enterprise should:
i. identify the smallest cash-generating unit that includes
the cash-generating unit under review and to which the
carrying amount of goodwill can be allocated on a
reasonable and consistent basis (the ‘larger’ cashgenerating
unit); and
ii. then, compare the recoverable amount of the larger cashgenerating
unit to its carrying amount (including the
carrying amount of allocated goodwill) and recognise any
impairment loss in accordance with paragraph 87.
79. Goodwill arising on acquisition represents a payment made by an acquirer in
anticipation of future economic benefits. The future economic benefits may