Can goodwill be partially impaired under IFRS?

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AcadiFi · Accepted Answer

Under IFRS (IAS 36), goodwill impairment testing occurs at the cash-generating unit (CGU) level. The recoverable amount is compared to carrying amount; impairment equals the excess. The loss is first allocated to goodwill of the CGU, then pro-rata to other assets — but never below the higher of fair value less costs to sell, value in use, or zero.

Partial goodwill method: IFRS allows two goodwill measurement choices at acquisition. Under the partial goodwill method, goodwill reflects only the parent's share of the acquirer's excess payment; the NCI is measured at proportional share of net identifiable assets. Under the full goodwill method, NCI is measured at fair value, capturing NCI's share of goodwill.

For impairment testing with partial goodwill, the goodwill must be 'grossed up' to include a notional NCI portion for comparison against recoverable amount. Example: Nordika AB owns 75% of Baltic Shipping. Goodwill on books is €60M (parent share only). For testing, notional goodwill = €60M / 0.75 = €80M. Compare €80M + net assets to recoverable amount. Any impairment is allocated first to the €80M notional goodwill, but only €60M (parent's share) hits the consolidated P&L.

IFRS impairments, unlike US GAAP, can never be reversed for goodwill.

Can goodwill be partially impaired under IFRS?

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