An impairment test for goodwill with indefinite useful life. This test is typically carried out on an annual basis, by comparing the carrying amounts of goodwill assets with their recoverable amounts, irrespective of whether an entity has any indication that these may be impaired or not. Impairment test may take place even more frequently if events or changes in circumstances indicate that the asset might be impaired.

However, goodwill is not an asset that can be sold separately in the market or to a market participant and hence it has no fair value. Furthermore, it would be quite impossible to estimate goodwill’s value in use (VIU), since it generates no income or cash flows on its own, but only as part of other assets. Therefore, impairment test would need to rely some business valuation test such as a testing involving a comparison between the book value of an entity or business unit with its revenue-generating ability (whether it is embodied in market value or projected profits). In accounting terms, this involves comparing the carrying amount of a cash-generating unit (CGU) including goodwill with its recoverable amount (its fair value less cost of disposal and value in use, whichever is higher).