Impairment of intangible assets and goodwill

Abstract

The International Financial Reporting Standards present restrictions when recognizing the intangible asset, and once recognized, the unverifiable estimates in the impairment of the intangible assets are incomplete. Conservative treatment in the recognition of R & D costs as expenses at the time they are incurred causes an aggressive effect when recognizing profits. Therefore, a net result is displayed for greater value, since the costs were reflected in previous periods. It involves an asymmetric treatment between the profits and the costs for the same operation: while the costs are treated as expenses, there is an underestimation of the company’s profits and assets in the R & D period. The purpose of the IFRS is the average or typical case, and in this sense, more and more companies are seeking to activate R & D expenses. Considering this context, this paper analyzes the rules related to impairment of value and intangibles, and the treatment applied to goodwill or goodwill as a result of business combinations. Furthermore, the cash generating units are addressed with particular emphasis on the goodwill or goodwill value through this analysis.