Question

In 2019, Alliant Corporation acquired Centerpoint Inc. for $506 million, of which $86 million was allocated to goodwill. At the end of 2021, management has provided the following information for a required goodwill impairment test:

Fair value of Centerpoint Inc.	$	378	million
Book value of Centerpoint’s net assets (excluding goodwill)		334	million
Book value of Centerpoint’s net assets (including goodwill)		420	million

Alliant prepares its financial statements according to IFRS, and Centerpoint is considered a cash-generating unit. Assume that Centerpoint’s fair value of $378 million approximates fair value less costs to sell and that the present value of Centerpoint’s estimated future cash flows is $383 million.

Required:
Determine the amount of goodwill impairment loss Alliant should recognize. (Negative amount should be indicated by a minus sign. Enter your answer in millions (i.e., 10,000,000 should be entered as 10)).

Answer 1

Testing Subsidiary (cash-generating unit for impairment)

At the end of 2021	Goodwill	Net identifiable assets	Total
Carrying amount	86	334	420
Recoverable amount (higher of fair value less costs to sell and the present value of estimated future cash flows)			383
Impairment loss (420 - 383)			37

Allocating the impairment loss

The impairment loss of $37 million should be allocated to the goodwill only as the carrying amount of goodwill is greater than the impairment loss.

Carrying amount after impairment loss allocation

At the end of 2021	Goodwill	Net identifiable assets	Total
Carrying amount	86	334	420
Impairment loss	(37)	-	(37)
Carrying amount after impairment loss	49	334	383