Order of testing

Learning objectives

• Determine the order of the tests: assets before the unit, units before the group of units to which goodwill has been allocated.L3, L4

Normative references

• IAS 36 §97When the assets constituting a CGU to which goodwill has been allocated are tested at the same time as the unit, they are tested before the unit; similarly, the CGUs constituting a group to which goodwill has been allocated that are tested at the same time as the group are tested before the group.
• IAS 36 §98If there is an indication of impairment for an asset within a CGU to which goodwill has been allocated, the asset is tested and its loss recognised before the CGU is tested; the same applies to a CGU within a group.

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

6 questions

• Valcourt tests at the same time its Printing CGU, to which goodwill is allocated, and several rotary presses of that unit whose recoverable amount can be estimated individually. In what order must it proceed?L3
• Ambrières's goodwill is allocated to a group of three CGUs, without it being possible to allocate it to each of them. The three units and the group are tested at the same time. Which approach is correct?L3
• At Tessane, a kiln in the Ceramics CGU, to which goodwill is allocated, suffered a breakdown during the year: there is an indication of impairment for this kiln, whose recoverable amount can be estimated individually. The annual test of the CGU takes place in the same period. What must the company do?L3
• Morvenne identifies an indication of impairment on a press in its Foundry CGU. The press has a carrying amount of 500,000 and an individual recoverable amount of 380,000. The CGU also includes other assets of 2,000,000 and goodwill of 300,000; its recoverable amount is 2,600,000. What impairment losses must be recognised?L4
• Lisière's goodwill of 600,000 is allocated to the group formed by its Alpha and Beta CGUs, without it being possible to allocate it to each. The Beta CGU shows an indication of impairment: carrying amount 1,500,000, recoverable amount 1,300,000. The Alpha CGU has a carrying amount of 2,000,000. The recoverable amount of the group is 3,700,000. What losses must be recognised?L4
• During a review, an auditor finds that Brévine tested directly the group of CGUs carrying its goodwill, whose recoverable amount far exceeds its carrying amount, without testing the Trading CGU, a member of the group, which nevertheless showed an indication of impairment. What conclusion should the auditor reach?L4