The short answer
- Under SFRS(I) 1-36 or FRS 36, goodwill and indefinite-life intangibles are tested at least annually.
- Assets are grouped into cash-generating units, and goodwill is allocated to them.
- The recoverable amount is the higher of value in use and fair value less costs of disposal.
- An impairment of goodwill can never be reversed.
The steps
- Identify cash-generating units and allocate goodwill.
- Check for indicators on other assets: losses, market changes, rising rates, a market value below book.
- Estimate recoverable amount: value in use (discounted cash flows) or fair value less costs of disposal.
- Compare with carrying amount. Recognise any shortfall.
- Disclose key assumptions and sensitivities.
Where tests go wrong
- Forecasts more optimistic than the budget the board approved
- Discount rates that do not reflect the unit's risk
- Terminal growth above long-run inflation
- Cash flows including restructurings not yet committed
- Use board-approved forecasts
- Reconcile the total of units to market value where possible
- Show what change in assumptions would cause an impairment
A worked example
A cash-generating unit carries net assets of S$9 million plus S$3 million of goodwill, S$12 million in total. Discounting the board-approved forecasts gives a value in use of S$10.5 million. Fair value less costs of disposal is lower. The recoverable amount is therefore S$10.5 million, and the impairment is S$1.5 million.
The loss is charged against goodwill first, reducing it to S$1.5 million. Only once goodwill is exhausted is any further loss spread across the unit's other assets. An impairment of goodwill can never be reversed later, even if the unit recovers.
When to test
Goodwill and intangibles with indefinite lives are tested every year, at the same time each year, and whenever there is an indication of impairment. Other assets are tested only when there is an indication. Pick a testing date that sits before the year-end rush, and update it if conditions change before the year end.
Questions people ask
How often must goodwill be tested for impairment?
At least annually, and whenever there is an indicator of impairment.
Can a goodwill impairment be reversed?
No.
Talk it through with an adviser
Tell us your structure and deadlines. We reply with what applies to you and a fixed-fee proposal.
Sources
- Corporate Professionals: Valuation under the Income-tax Rules, 2026 (secondary source)
General information only, last reviewed 11 November 2026. It is not advice for your situation. Laws and practice change, and the official sources linked above prevail. Speak to a qualified adviser before you act.