Buster Ltd had purchased goodwill to the value of $100,000 recorded in its consolidated financial statements.The goodwill has been determined to have an indefinite useful life.However,one year later Buster Ltd's cash generating units has been determined to have incurred an impairment loss of $13,000.What is the appropriate action for Buster limited to comply with AASB 138 "Intangible Assets" and AASB 136 "Impairment of Assets"?

Question

Quizplus · Accepted Answer

The appropriate action in this case would be to recognise the impairment loss of $13,000 and credit goodwill. According to AASB 138, intangible assets with an indefinite useful life should not be amortised, but tested for impairment annually. As the cash generating unit has incurred an impairment loss, the goodwill needs to be reduced accordingly. AASB 136 requires the recognition of impairment loss and a corresponding reduction in the carrying value of the asset. Therefore, option B is the best choice in this scenario.

Buster Ltd Had Purchased Goodwill to the Value of $100,000