Objective IAS 36 goodwill impairment testing for UAE and GCC entities reporting under IFRS. Annual and trigger-based reviews. Cash-generating unit (CGU) analysis. Value-in-use DCF. Accepted by Big 4 and mid-tier auditors. CFA-led. Fixed fee from AED 15,000.
Goodwill impairment testing is the IAS 36-required annual (and trigger-based) review comparing a cash-generating unit's carrying value to its recoverable amount, the higher of Value in Use (DCF) and Fair Value Less Costs to Sell. Goodwill is not amortised, so it must be tested at least once a year regardless of visible indicators, and again whenever a trigger event (market decline, adverse conditions, underperformance) arises. If carrying value exceeds recoverable amount, an impairment loss is recognised. Corvian Advisory delivers IAS 36-compliant, Big 4-accepted reports from AED 15,000.
IAS 36 requires a specific, documented approach to goodwill impairment testing. Here is how we work through it, from CGU allocation to recoverable amount determination and disclosure support.
We start by identifying the cash-generating units (or groups of CGUs) to which goodwill has been allocated, or should be allocated, in line with the acquisition business case and IAS 36 requirements. Goodwill must be allocated to CGUs at a level no higher than an operating segment. We review the existing allocation and flag any issues before testing begins.
For non-goodwill assets, we assess whether impairment indicators exist, both external (market, economic, interest rate, entity market cap) and internal (usage changes, deteriorating performance, management reporting). For goodwill, annual testing is mandatory regardless of indicators.
We determine the recoverable amount, the higher of value-in-use (VIU) and fair value less costs to sell (FVLCS). For most UAE private CGUs, VIU is calculated using a 5-year DCF with a terminal value, applying a pre-tax discount rate consistent with the WACC for comparable businesses in the same sector, adjusted for UAE market risk factors.
We calculate the impairment headroom (recoverable amount minus carrying amount) and run sensitivity analysis on key assumptions, typically revenue growth rate, operating margin, and discount rate. IAS 36 requires disclosure of the assumptions to which recoverable amount is most sensitive.
We prepare a comprehensive impairment testing report with full methodology documentation, model assumptions, sensitivity tables, and IAS 36 disclosure support text. We engage directly with the company's audit team, Big 4 or mid-tier, to satisfy auditor review requirements.
IAS 36 requires entities to assess impairment indicators at each reporting date. For UAE and GCC entities, several triggers are particularly relevant given regional market dynamics.
Goodwill impairment is one of the most heavily scrutinised areas of a UAE audit. These are the five challenges that come up in almost every review, and how a defensible test answers them.
| Auditor Challenge | What They Are Testing | How We Support the Position |
|---|---|---|
| Cash flow projections vs track record | Whether the budget behind the test is more optimistic than the entity has ever delivered | Bridge between historical performance and projections, with variance analysis against prior budgets |
| Discount rate (WACC) | Whether the WACC reflects country risk, size premium, and CGU-specific risk rather than a generic rate | Full WACC build-up with sourced inputs: UAE risk-free proxy, sector betas, size and specific-risk premia |
| Terminal growth rate | Whether long-term growth exceeds the economy or sector it operates in | Terminal growth anchored to GCC inflation and sector outlook, never above long-run nominal GDP |
| CGU allocation | Whether goodwill is tested at the right level rather than smoothed across unrelated units | CGU identification consistent with internal reporting and the level at which goodwill is monitored |
| Headroom sensitivity | Whether a reasonably possible change in assumptions would trigger impairment, and if disclosure reflects that | Sensitivity tables on WACC, growth, and margins with IAS 36 paragraph 134 disclosure drafting |
We build the impairment model, document every input, and respond to auditor queries directly until sign-off. For UAE groups with December year-ends, the practical window is October to February; booking the test early avoids the audit-season squeeze.
IAS 36 compliant CGU impairment reviews accepted by Big 4 auditors. Annual and trigger-based. CFA-led. Fixed fee from AED 15,000 per CGU.