Identify and assess impairment risks early and reliably
An impairment test under IAS 36 or IDW RS HFA 10 is much more than a regulatory requirement. It provides transparency on the recoverable amount of business units, investments, intangible assets and goodwill. Companies need to develop robust forecasts, realistic growth assumptions and appropriate discount rates. Our structured approach helps identify impairment risks early and ensures that decisions are based on reliable information.
Our experts can support you throughout the process—from defining cash-generating units (CGUs) and analysing business plans to determining the recoverable amount and preparing documentation for auditors and supervisory bodies. We focus on transparent assumptions, industry-specific market data and audit-ready documentation. This reduces the workload for your internal teams while improving the quality and clarity of the results.
Whether you need an annual goodwill impairment test or an impairment test triggered by specific circumstances, we provide practical solutions, robust results and clear recommendations. Our aim is to make impairment testing not only compliant, but also a valuable input into strategic business decisions.
The benefits of working with Grant Thornton
Robust valuation results
We develop a sound valuation basis that takes account of your company’s forecasts, market information and industry-specific parameters.
Early identification of risks
Sensitivity analyses and a structured review of key assumptions help identify potential impairment risks in good time.
Audit-ready documentation
We present all significant assumptions, calculations and results transparently and clearly, providing a robust basis for auditors and decision-making bodies.
Our process at a glance
We assess whether an annual goodwill impairment test or an impairment test triggered by specific circumstances is required. Together, we define the scope, relevant assets and timetable.
We help you appropriately define cash-generating units (CGUs) and support the clear allocation of existing goodwill balances.
We review the underlying forecasts, cash flows and key valuation assumptions. We assess the reasonableness and consistency of growth rates, margin trends and other value drivers.
Using current capital market data and suitable comparable companies, we determine risk-adjusted discount rates. We transparently document the peer group selection and the derivation of the parameters used.
We determine the recoverable amount based on either value in use or fair value less costs of disposal. We select the method best suited to the reason for the test and the available data.
We compare the recoverable amount with the relevant carrying amount to determine whether an impairment loss may be required. Sensitivity analyses show how changes in key assumptions could affect the result.
We prepare clear, audit-ready documentation of the methodology, assumptions and results. On request, we can also tailor the key findings for auditors, executive management or supervisory bodies.
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Frequently asked questions about impairment testing under IAS 36 and IDW RS HFA 10
An impairment test is required when there are indications that an asset or cash-generating unit may have been impaired. IAS 36 also requires goodwill and certain intangible assets not yet available for use to be tested at least annually. Under IDW RS HFA 10, impairment indicators also require the recoverability of the carrying amount of an investment to be assessed.
Key inputs include up-to-date business plans, well-supported assumptions for revenue, margins, investment and working capital, and an appropriate derivation of discount and growth rates. The scope of the asset or business being valued, historical forecast-to-actual variances, and relevant market and industry information must also be considered. The more consistently the data, forecasts and valuation model work together, the more robust the result.
Under IAS 36, the recoverable amount is the higher of value in use and fair value less costs of disposal. Valuation methods based on discounted cash flows are commonly used, with future cash flows discounted to the valuation date. The appropriate method depends on the reason for the test, the available data and the requirements of the applicable accounting framework.
IAS 36 governs impairment of individual assets and cash-generating units in IFRS financial statements. IDW RS HFA 10 provides guidance on valuing investments and other equity interests in statutory financial statements prepared under German commercial law. Differences may relate in particular to the asset or interest being valued, cash flows, the discount rate and the treatment of taxes. Whether separate models are needed or an existing model can be appropriately adapted should be assessed in light of the technical requirements and practical considerations.
The business plan is the starting point for estimating future cash flows. It must be reasonable, consistent and aligned with internal and external data. The discount rate must reflect risks that are not already included in the cash flows. Even small changes in key assumptions can have a significant effect on the valuation, so the derivation of the assumptions and the sensitivity analyses should be documented transparently.
We can support you from defining the asset or business being valued, reviewing the forecasts and determining the discount rate through to preparing a clear valuation model. We take into account the requirements of IAS 36 or IDW RS HFA 10, as well as the expectations of auditors and other stakeholders. On request, we can also assist with sensitivity analyses, documentation and discussions during the audit process.