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Commission Regulation
(EC) No 2236/2004 of 29 December 2004 amending
Regulation (EC) No 1725/2003 adopting certain
international accounting standards in accordance with
Regulation (EC) No 1606/2002 of the European Parliament
and of the Council as regards International Financial
Reporting Standards (IFRSs) Nos 1, 3 to 5, International
Accounting Standards (IASs) Nos 1, 10, 12, 14, 16 to 19,
22, 27, 28, 31 to 41 and the interpretations by the
Standard Interpretation Committee (SIC) Nos 9, 22, 28
and 32
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87. If an
entity reorganises its reporting structure in a way that
changes the composition of one or more cash-generating units
to which goodwill has been allocated, the goodwill shall be
reallocated to the units affected. This reallocation shall
be performed using a relative value approach similar to that
used when an entity disposes of an operation within a
cash-generating unit, unless the entity can demonstrate that
some other method better reflects the goodwill associated
with the reorganised units.
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Example
Goodwill had
previously been allocated to cash-generating unit A. The
goodwill allocated to A cannot be identified or
associated with an asset group at a level lower than A,
except arbitrarily. A is to be divided and integrated
into three other cash-generating units, B, C and D.
Because the
goodwill allocated to A cannot be non-arbitrarily
identified or associated with an asset group at a level
lower than A, it
is reallocated to units B, C and D on the basis of the
relative values of the three portions of A before those
portions are integrated
with B, C and D.
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Testing cash-generating units
with goodwill for impairment
88. When, as
described in paragraph 81, goodwill relates to a
cash-generating unit but has not been allocated to that
unit, the unit shall be tested for impairment, whenever
there is an indication that the unit may be impaired, by
comparing the unit’s carrying amount, excluding any
goodwill, with its recoverable amount. Any impairment loss
shall be recognised in accordance with paragraph 104.
89. If a
cash-generating unit described in paragraph 88 includes in
its carrying amount an intangible asset that has an
indefinite useful life or is not yet available for use and
that asset can be tested for impairment only as part of the
cash-generating unit, paragraph 10 requires the unit also to
be tested for impairment annually.
90. A
cash-generating unit to which goodwill has been allocated
shall be tested for impairment annually, and whenever there
is an indication that the unit may be impaired, by comparing
the carrying amount of the unit, including the goodwill,
with the recoverable amount of the unit. If the recoverable
amount of the unit exceeds the carrying amount of the unit,
the unit and the goodwill allocated to that unit shall be
regarded as not impaired. If the carrying amount of the unit
exceeds the recoverable amount of the unit, the entity shall
recognise the impairment loss in accordance with paragraph
104.
Minority
interest
91. In accordance with IFRS
3, goodwill recognised in a business combination represents
the goodwill acquired by a parent based on the parent’s
ownership interest, rather than the amount of goodwill
controlled by the parent as a result of the business
combination. Therefore, goodwill attributable to a minority
interest is not recognised in the parent’s consolidated
financial statements. Accordingly, if there is a minority
interest in a cash-generating unit to which goodwill has
been allocated, the carrying amount of that unit comprises:
(a) both the parent’s
interest and the minority interest in the identifiable
net assets of the unit; and
(b) the parent’s
interest in goodwill.
However, part of the
recoverable amount of the cash-generating unit determined in
accordance with this Standard is attributable to the
minority interest in goodwill.
92. Consequently,
for the purpose of impairment testing a non-wholly-owned
cash-generating unit with goodwill, the carrying amount of
that unit is notionally adjusted, before being compared with
its recoverable amount. This is accomplished by grossing up
the carrying amount of goodwill allocated to the unit to
include the goodwill attributable to the minority interest.
This notionally adjusted carrying amount is then compared
with the recoverable amount of the unit to determine whether
the cash-generating unit is impaired. If it is, the entity
allocates the impairment loss in accordance with paragraph
104 first to reduce the carrying amount of goodwill
allocated to the unit.
93. However,
because goodwill is recognised only to the extent of the
parent’s ownership interest, any impairment loss relating to
the goodwill is apportioned between that attributable to the
parent and that attributable to the minority interest, with
only the former being recognised as a goodwill impairment
loss.
94. If the total
impairment loss relating to goodwill is less than the amount
by which the notionally adjusted carrying amount of the
cash-generating unit exceeds its recoverable amount,
paragraph 104 requires the remaining excess to be allocated
to the other assets of the unit pro rata on the basis of the
carrying amount of each asset in the unit.
95. Illustrative
Example 7 illustrates the impairment testing of a nonwholly
owned cash-generating unit with goodwill.
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