The test of the whole investment as a single asset

Learning objectives

• Calculate the impairment loss on the net investment by comparing its entire carrying amount with its recoverable amount.L3
• Record the impairment loss on the investment.L3

Normative references

• IAS 28 §42Because goodwill included in the carrying amount of the net investment is not separately recognised, it is not tested for impairment separately under the IAS 36 requirements for goodwill: the entire carrying amount of the investment is tested under IAS 36 as a single asset, by comparing it with its recoverable amount (the higher of value in use and fair value less costs of disposal), whenever paras. 41A to 41C indicate that it may be impaired. The impairment loss is not allocated to any asset, including goodwill, that forms part of that carrying amount; any reversal is recognised under IAS 36 to the extent that the recoverable amount subsequently increases. Value in use is estimated either from the share of the investee's expected cash flows (operations and ultimate disposal) or from the cash flows from dividends and ultimate disposal, both methods giving the same result under appropriate assumptions.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

4 questions

• Alba SA holds an interest in Brise SA, an associate, and there is objective evidence of impairment. The whole carrying amount of the investment, including goodwill, is {carrying_amount}. Its value in use is {value_in_use} and its fair value less costs of disposal is {fair_value_less_costs}. Calculate the recoverable amount of the investment and the impairment loss.L3
• Alba SA holds an interest in Brise SA, an associate. Following objective evidence of impairment, the test of the net investment, including goodwill, gives a recoverable amount of {recoverable_amount} against a whole carrying amount of {carrying_amount} (case data). Record the entry for the impairment loss.L3
• Alba SA holds an interest in Brise SA, an associate, whose whole carrying amount is 1,800,000, including 200,000 of implicit goodwill. Following objective evidence of impairment, a colleague tests the goodwill separately and compares only the balance of 1,600,000 with the recoverable amount. What is the error?L3
• Alba SA must test the net investment in Brise, an associate, whose whole carrying amount, including goodwill, is 2,000,000. There is objective evidence of impairment. How does it apply IAS 36?L3