Question

Briefly explain the differences between U.S. GAAP and IFRS in the measurement of an impairment loss for goodwill.

Solutions

Verified

Under US. GAAP, the impairment loss for goodwill is a two-step process. The first step is $\textbf{reoverability test}$, in which we see if the fair value of the goodwill is less than its book value. If yes, we move to the measurement, in which we calculate the excess of the book value over the "implied" fair value.

Under IFRS, the impairment loss is a one-step process. For it, we need to get the recoverable amount which is the highest between the present value of future cash flows and the fair value less cost to sell. Then we determine the difference between the book value and the recoverable amount.

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