Company M has a carrying amount of goodwill of ₹220 crores. At the end of the year, the fair value less costs of disposal of its cash‑generating unit (CGU) is ₹200 crores and the value in use of the CGU is ₹210 crores. Calculate the impairment loss on goodwill, record the journal entry, and state how the loss should be disclosed in the financial statements.

Step-by-step solution

1. Determine the carrying amount of goodwill: ₹220 crores.
2. Compute fair value less costs of disposal: ₹200 crores.
3. Compute value in use: ₹210 crores.
4. Select the higher of the two values as recoverable amount: ₹210 crores.
5. Calculate impairment loss: 220 – 210 = 10 crores.
6. Journal entry: Dr. Impairment loss 10 crores – Cr. Goodwill 10 crores.
7. Disclose the impairment loss in the profit and loss account and note the carrying amount of goodwill in the balance sheet.

Concept tested: Impairment test of goodwill

Published 10 October 2026 · How this solution was prepared and checked