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Difference Between Goodwill And Impairment

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Introduction
Goodwill and impairment is very well related in accounting concept, impairment is a concept in accounting that explains stable reduction in value of asset (Dauang-ploy,O.,Shelton,M.,&Omer,K.,2005). To calculate impairment loss it is essential to de-cide the amount of value in use, and this involve the calculation of the cash flows which are supposed to be produced from the use of assets. Goodwill can only be recognised when it is obtain in business combination.

Impairment
Impairment is a concept in accounting that explains stable reduction in value of asset.
Total profit and cash flow are expected to be produce by certain asset which is occa-sionally contrasted with book value. If the book value is more than cash flow of the asset, the remaining amount should be written off and the value should be rejected from the balance sheet (Dauangploy,O.,et. al.,2005). If the carrying amount is more than recoverable amount, it can indicate the loss of impairment. Then the recover-able amounts need to be written down. There are two different models to recognise impairment, cost model and revaluation model. Impairment loss in cost model can be recognised directly in profit or loss. In revaluation model asset is measured in its fair value and impairment loss is recognised as descending revaluation.

Impairment loss, Cash Generating Unit¬¬¬¬¬¬
To calculate impairment loss it is essential to decide the amount of value in use, and this involve the calculation of the cash flows which are supposed to be produced from the use of assets. Though, some assets don’t produce cash flow by itself. This is the reason why the cash flow is increasing due to the combination of few assets together. In other word, car used by sales person does not produce cash flow by itself (Sun,L., & Zhang,J.,2017). When the asset can not generate cash flow by itself it is necessary to group them and it is called “cash generating unit”. Cash generating unit is the smallest recognisable group of assets that brings cash inflow.

At the end of the period after identifying what is Cash Generating unit is, manage-ment need to figure out if impairment is occur or not. If there is possibility of impair-ment, calculation of recoverable amount of the

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