1. Evaluate Vivendi’s goodwill impairment note in Exhibit 1. Is it clear? Is it comprehensive?
2. Could Vivendi have reported a goodwill impairment charge for 2009? Explain.
Exhibit 1 is Vivendi Group’s goodwill impairment note from its 2009 annual report. The following is an overview of IFRS Impairment rules from IAS 36, Impairment of Assets. Tangible Asset; Identifiable Intangible Assets Under IFRS, an asset is impaired if its carrying amount (book value) is greater than its recoverable amount, where recoverable amount equals the greater of an asset’s (1) fair value less cost to sell or (2) value in use, which is generally the present value of the asset’s future cash flows. The loss on the impairment is reported as a loss in a firm’s income statement. Except for goodwill, if at a later date the firm determines the impairment no longer exists, the asset should be increased in value, up to its original cost, less accumulated depreciation. That is, under IFRS, the impairment is reversed (except for goodwill).