What is impairment test in SAP FIN-SEM-BCS - Business Consolidation?

SAP Term: impairment test

• Component: FIN-SEM-BCS

• Component Name: Business Consolidation

• Description: Method for treating goodwill in the consolidation of investments. The impairment test is based on the assumption that goodwill has an indefinite or undeterminable useful life and can, therefore, not be amortized on an ordinary basis. Instead, goodwill undergoes an annual impairment test, in which the fair value of the goodwill of a consolidation unit is calculated and compared to its book value. If the fair value is less than the book value, the goodwill is written down to the fair value.

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• Key Concepts:
  Impairment test is a process used to determine whether an asset has suffered an impairment loss. It is a financial statement analysis technique used to identify potential losses in the value of an asset due to changes in market conditions or other factors. The impairment test is required by International Financial Reporting Standards (IFRS) and is used to ensure that assets are not overvalued on the balance sheet.
  
  How to use it:
  In SAP Business Consolidation, the impairment test is used to assess the value of assets and determine if they have been impaired. The process involves comparing the carrying amount of an asset with its recoverable amount, which is the higher of its fair value less costs to sell or its value in use. If the carrying amount exceeds the recoverable amount, then an impairment loss must be recognized.
  
  Tips & Tricks:
  When performing an impairment test, it is important to consider all relevant factors that could affect the value of an asset. This includes market conditions, economic trends, and any changes in the asset’s use or purpose. Additionally, it is important to ensure that all calculations are accurate and up-to-date.
  
  Related Information:
  For more information on impairment tests and how they are used in SAP Business Consolidation, please refer to the official SAP documentation. Additionally, there are many online resources available that provide further guidance on this topic.