Accounting Standards 1-29 - Seth & Associates

esult from synergy between the identifiable assets acquired or from assets
that individually do not qualify for recognition in the financial statements.
Goodwill does not generate cash flows independently from other assets or
groups of assets and, therefore, the recoverable amount of goodwill as an
individual asset cannot be determined. As a consequence, if there is an
indication that goodwill may be impaired, recoverable amount is determined for
the cash-generating unit to which goodwill belongs. This amount is then
compared to the carrying amount of this cash-generating unit and any
impairment loss is recognised in accordance with paragraph 87.
80. Whenever a cash-generating unit is tested for impairment, an enterprise
considers any goodwill that is associated with the future cash flows to be
generated by the cash-generating unit. If goodwill can be allocated on a
reasonable and consistent basis, an enterprise applies the ‘bottom-up’ test
only. If it is not possible to allocate goodwill on a reasonable and consistent
basis, an enterprise applies both the ‘bottom-up’ test and ‘top-down’ test (see
Example 7 given in the Appendix).
81. The ‘bottom-up’ test ensures that an enterprise recognises any impairment loss
that exists for a cash-generating unit, including for goodwill that can be
allocated on a reasonable and consistent basis. Whenever it is impracticable to
allocate goodwill on a reasonable and consistent basis in the ‘bottom-up’ test,
the combination of the ‘bottom-up’ and the ‘top-down’ test ensures that an
enterprise recognises:
a. first, any impairment loss that exists for the cash-generating unit
excluding any consideration of goodwill; and
b. then, any impairment loss that exists for goodwill. Because an
enterprise applies the ‘bottom-up’ test first to all assets that may be
impaired, any impairment loss identified for the larger cash-generating
unit in the ‘top-down’ test relates only to goodwill allocated to the larger
unit.
82. If the ‘top-down’ test is applied, an enterprise formally determines the
recoverable amount of the larger cash-generating unit, unless there is
persuasive evidence that there is no risk that the larger cash-generating unit is
impaired.
Corporate Assets
83. Corporate assets include group or divisional assets such as the building
of a headquarters or a division of the enterprise, EDP equipment or a
research centre. The structure of an enterprise determines whether an
asset meets the definition of corporate assets (see paragraph 4) for a
particular cash-generating unit. Key characteristics of corporate assets
are that they do not generate cash inflows independently from other
assets or groups of assets and their carrying amount cannot be fully
attributed to the cash-generating unit under review.
84. Because corporate assets do not generate separate cash inflows, the
recoverable amount of an individual corporate asset cannot be