Case Law on Treatment of Impairment Loss on Cash Generating Unit (CGU) & Its Reversal
- Blog|News|Account & Audit|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 4 March, 2024
Latest from Taxmann
A company has acquired another company for the purpose of expansion and has also generated goodwill on account of higher purchase consideration than the net asset value of the vendor company. The acquired company is considered as one cash generating unit by the acquirer company. After two years, the assets of the acquired company are seized by the government because of violation of environmental clearances.
Para 9 of Ind AS 36, Impairment of Assets, requires that an entity shall assess at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset and shall impair the assets with the difference of its carrying amount over recoverable amount.
The company wants to know impairment due to this violation on acquired company. Whether the acquired goodwill will also be impacted by such impairment loss.
Para 110 requires that an entity shall assess at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. Any reversal of an impairment loss shall be allocated to the assets of the CGU, except for goodwill, pro rata with the carrying amounts of those assets.
This case study also analyse the treatment of the reversal of the impairment loss and whether the acquired goodwill be restored on release of the restrictions imposed by the government.
Click Here To Read The Full Story
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
CA | CS | CMA
