Once an acquisition is undertaken by an entity and goodwill is recorded in the books of the acquirer, the onus is on the acquiror to undertake annual impairment reviews of goodwill and other intangible assets. IAS 36 requires that the recoverable amount is the higher of the Fair Value Less Costs to Sell (FVLCS) and the Value in Use (VIU).
During times of economic uncertainty, there is a spotlight on undertaking impairment reviews, to ensure that an entity’s assets or Cash Generating Unit (CGU) are not carried at more than their recoverable value (i.e. higher of the FVLCS and VIU). Careful assessment of external and internal indicators of impairment must be undertaken and ensured that such reviews are undertaken whenever there is an indication of potential impairment.
It is imperative that financial reports of companies provide useful and meaningful insights for investors and other users of financial reports, so that they can take informed investment-related and other decisions.
Valuations can get complex, especially given the subjectivity involved in conducting impairment calculations, taking account of uncertainties, and making key assumptions while reviewing the future cash flows. The knowledge of the sector in which the company operates as well as a keen understanding of business dynamics and potential prospects, makes the impairment exercise and an opinion on the impairment, a valuable input in the financial reporting process for any company.
PKF UAE has in place a team of experienced corporate financial professionals in its Management Consulting division who have significant experience of undertaking such impairment tests/ reviews for large publicly listed and private companies alike.
Would you like an impairment testing of good and intangible assets to be conducted? You are at the right place. Contact us at email@example.com for impairment testing.