An impairment review

A finance manager describes the approach taken to reviewing intangible asset values.

Select the best option from those shown.

We have two types of intangible asset on our balance sheet: goodwill, relating to the acquisition we made a few years ago; and capitalised product development costs.

We regularly review the carrying value of these assets to make sure they're still supported by the cash the related assets generate. Our calculations are reviewed by our auditors as part of their work.

The acquisition is trading ahead expectations, so we've been able to the balance sheet goodwill value without too many difficulties.

Some of the recent product launches elsewhere in the business, on the other hand, have been very disappointing. We some of the costs of developing these products. Sales are less than half what we expected, meaning cash is low. As a result, we've had to write the carrying value of the associated intangible assets by around sixty per cent.

We've also just discontinued a range of products, so we've had to write the capitalised development costs related to them.

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