Goodwill Impairment Testing Disclosures under Ind AS: Transition from IGAAP to Ind-AS has resulted in change in treatment of goodwill. IGAAP prescribe amortization if it arises on amalgamation and impairment testing if it arises on consolidation, whereas Ind-AS prescribe only impairment testing. The purpose of the current study is to provide evidence of the extent of compliance with respect to the disclosure requirements of goodwill impairment testing as per Ind-AS 36.
Goodwill Impairment Testing
The remaining paper has following sections- a. Estimates required for impairment testing
- b. Disclosure requirement as per Ind AS 36
- c. Research methodology
- d. Result and conclusion
a. Estimates required for impairment testing
- i. Remaining useful life
- ii. Cash flow projections
- iii. Discount rate
b. Disclosure requirement as per Ind-AS 36
As mentioned in above section firms need to estimate useful economic life, cash flow and discount rate to measure value in use, it is expected that a firm provides disclosure in its annual report about these estimates. In the absence of such disclosures readers will be clueless about the impairment testing method adopted. In the event of no impairment charge on goodwill, such disclosures become critical, as it will help readers to understand the economic rationale behind it For transparency Ind-AS 36, particularly para 134 to 137, has prescribed disclosure requirements with respect to estimates used to measure recoverable amounts of goodwill. Current study focus only on value in use estimates hence only requirements laid down in para 134 (d) (i)-(v) have been considered, which are described below-- i. Assumptions based on which cash flow projection are made
- ii. Description of management's approach to determining the values assigned to each key assumption
- iii. Period for which cash flow projections are made
- iv. Growth rate used in projecting cash flows
- v. Discount rate applied to cash flow projection
c. Research methodology
- i. It should be listed at BSE/NSE or both
- ii. It should have reported goodwill as on March 31, 2017 under Ind-AS
- iii. It should not have charged impairment on goodwill for the year 2016-17
- iv. Its value of gross goodwill should be 100 crores or more
- v. Its ratio of gross goodwill to total assets should be 5% or more
- i. Aditya Birla Fashion & Retail Ltd.
- ii. Jagran Prakashan Ltd.
- iii. Jyothy Laboratories Ltd.
- iv. L & T Technology Services Ltd.
- v. P V R Ltd.
- vi. Pfizer Ltd.
d. Result and conclusion
Table-1 provides disclosure score of the sample firms based on disclosure analysis conducted using the index.Firm | Disclosure Score |
Aditya Birla Fashion & Retail Ltd. | 5 |
Jagran Prakashan Ltd. | 0 |
Jyothy Laboratories Ltd | 5 |
L & T Technology Services Ltd. | 0 |
P V R Ltd. | 0 |
Pfizer Ltd | 5 |