Thus, when all or a portion of goodwill cannot be allocated reasonably and consistently to the CGU being tested for impairment, two levels of impairment tests are carried out, viz., bottom-up test and top-down test. 3.

When should goodwill be impaired?

If the goodwill asset becomes impaired by a decline in the value of the asset below the purchase price, the company would record a goodwill impairment. This is a signal that the value of the asset has fallen below the amount that the company originally paid for it.

How do you allocate goodwill to CGUs?

Allocation of goodwill

For impairment testing, goodwill is allocated (IAS 36.80-87) to the CGU that benefits from the synergies of the related business combination. If goodwill cannot be allocated on a non-arbitrary basis to individual CGUs, it is allocated to groups of CGUs.