Impairment of Goodwill which was revalued on account of foreign exchange.

Question

My company has revalued its goodwill on consolidation $1000 from INR 50,000 in 2010 (INR 50 per USD on the date of acquisition of subsidiaries) to INR 67,000 (INR 67 per USD as on year end) in line with IAS 21 with the corresponding effect given to Translation Reserve.

Now impairment testing through DCF model was done which valued goodwill at INR 45,000. What shall be the accounting treatment in this case? Which one shall be the right option:

1. Book the entire impairment of INR 22,000 (67,000 - 45,000) in Profit and Loss.
2. Book the impairment of only INR 5,000 (50,000-45,000) in Profit and Loss and INR 17,000 (67,000 - 50,000) in OCI
3. I should re-calculate the goodwill as per the DCF model in USD terms and check impairment in accordance with that

Answer 1

Goodwill arising on acquisition is a historical item appearing only in the consolidated financial statements, not in the separate financial statement of a foreign subsidiary.
On acquisition, you calculate goodwill using the actual translation rates at the date of acquisition. According to some opinions, goodwill should not be revalued as it’s a historical asset, but the exchange rate is grouped with all other exchange differences.
If the same is revalued, it is part of Currency Translation Difference should be reported as other Comprehensive Income.
Well in this case option 2 should be opted for Book the impairment of only INR 5,000 (50,000-45,000) in Profit and Loss and INR 17,000 (67,000 - 50,000) in OCI.