Entity C acquired a business before its date of transition to IFRSs. The cost of acquisition was €530 and Entity C allocated the purchase price as follows:

Properties, at carry-over cost


Liabilities, at amortised cost




Purchase price


The goodwill under Entity C”s previous GAAP relates entirely to the properties that had a fair value at date of acquisition that was significantly in excess of their value on a carry-over cost basis. In Entity C”s opening IFRS statement of financial position the same assets, liabilities and goodwill are valued as follows:

Properties, at fair value


Liabilities, at amortised cost


Provisional IFRS goodwill (before impairment test)


Total carrying amount


Entity C used the option to measure the properties at fair value at its date of transition in its opening IFRS statement of financial position. However, IFRS 1 does not permit goodwill to be adjusted to reflect the extent to which the increase in fair value relates to other assets recognised at the time of the acquisition. The total carrying amount of the acquired net assets including goodwill of €830 may now exceed the recoverable amount. When Entity C tests the ‘provisional IFRS goodwill for impairment on first-time adoption of IFRSs, the recoverable amount of the business is determined to be €620. Accordingly, it will have to recognise an impairment of goodwill of €210 and disclose this impairment under IFRS 1.

In some cases the write-off will completely eliminate the goodwill and thereby any ‘double counting. However, in this particular case the remaining goodwill of €50 in truth represents goodwill that was internally generated between the date of acquisition and the date of transition to IFRSs.

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