MILES / Financial Reporting Valuation
Goodwill & Asset Impairment Assessment
Clear, well-supported valuation analysis for your annual impairment assessment.
Discuss Your Goodwill Impairment Assessment
Goodwill impairment testing requires consistency between the business outlook, cash flow forecasts and valuation assumptions. Management needs to understand the valuation results and explain the evidence supporting its conclusions.
MILES provides valuation support for goodwill and asset impairment testing to businesses in Hong Kong and those with cross-border operations. We help finance teams undertake assessments under HKAS 36 / IAS 36 and communicate valuation methods, key assumptions and findings to auditors.
We also support impairment assessments of relevant tangible and intangible assets. The scope should reflect the assets or cash-generating units involved, the impairment indicators and the applicable reporting basis.
When should you speak with us?
- You are preparing your annual goodwill impairment test.
- An acquired business is reporting revenue, earnings or cash flows below expectations.
- Market conditions, financing costs or business plans have changed significantly.
- A group restructuring or business integration requires a review of the assessment basis.
- Your auditors require further explanations of forecasts, discount rates or sensitivity analysis.
How we help
Define the assessment scope
We discuss the identification of cash-generating units (CGUs) or groups of CGUs, goodwill allocation and the relevant assets and liabilities with management, helping establish a consistent basis for comparing carrying amounts with valuation results.
Analyse forecasts and key assumptions
We consider historical performance, management budgets and relevant market information when analysing assumptions for revenue growth, margins, working capital and capital expenditure. We identify areas requiring further support or explanation.
Assess recoverable amount
Depending on the circumstances, we apply appropriate methods to assess value in use or fair value less costs of disposal, explaining the basis for discount rates, long-term growth rates and other key parameters.
Explain sensitivity to changes in assumptions
We analyse how changes in key assumptions affect valuation results, helping management understand the headroom between recoverable amount and carrying amount, and the factors that could affect the conclusion.
Provide reporting and auditor support
Within the agreed scope, we prepare valuation reports and supporting analysis, and respond to auditors’ questions on valuation methods, data sources and assumptions.
What information is typically required?
- Latest financial statements and management accounts
- Management-approved business forecasts and key assumptions
- Carrying amounts of goodwill and relevant assets and liabilities
- Acquisition background and previous PPA or impairment reports
- Details of business changes and the financial reporting timetable
If your information is not yet complete, we can first discuss the scope of work and preparation priorities.
Frequently asked questions
Is goodwill impairment testing still required if the business is profitable?
Goodwill must be tested for impairment annually and when impairment indicators arise. Profitability alone does not replace an impairment assessment.
Can we use last year’s valuation model?
A previous model may provide a starting point, but current business circumstances, forecasts and market parameters still need to be reviewed. Whether individual assumptions remain appropriate depends on the current-year evidence.
How much time should we allow?
Timing depends on the number of assessment units, the completeness of information and the complexity of the analysis. Once you provide your reporting deadline, business overview and available information, we can discuss the timetable and fees.
Accounting standard: IAS 36
Prepare early for this year’s impairment assessment
Tell us your financial reporting date, the businesses involved and your current progress. We will discuss the assessment scope, information requirements and next steps with you.
Enquire About Impairment Testing