# Impairment Test Memo: [CGU or reporting unit] [Test date]

> Technical accounting memo documenting an impairment test of goodwill,
> indefinite-life intangible assets or a cash-generating unit with an
> impairment indicator: scope and triggers, CGU identification and
> goodwill allocation, carrying amount, recoverable amount (value in
> use and fair value less costs of disposal), discount rate, key
> assumptions, sensitivity and headroom, impairment loss allocation, US
> GAAP differences and disclosure. Structure aligned with IAS 36
> Impairment of Assets and FASB ASC Topics 350 and 360, cited by
> standard and paragraph number only. Obtain the standard for the
> normative text. Replace every `[bracketed]` value and every row
> marked *Example*. This is a document format, not accounting, audit,
> valuation, tax or financial advice.

<!--
Guidance: How to use this template
- Purpose: show the board, the audit committee and the auditor how the
  recoverable amount was estimated, which assumptions matter, and how
  much they would have to move before an impairment arises.
- Prepare one memo per annual test date, with a section per CGU or
  group of CGUs carrying significant goodwill, and a separate memo for
  each triggered test during the year.
- Cite paragraph numbers, never copy or paraphrase standard text.
- Keep the valuation model as a controlled workbook (see Financial
  Model Specification, `finance/financial-model-specification`) and
  reference its version here. Every number in the memo should trace to
  that version.
- The worked example uses the fictional Corvid Commerce Group (IFRS
  reporter, functional currency EUR, calendar year; parent Corvid
  Commerce Group plc, listed in London with ADSs in New York): the
  annual goodwill test at the group's fixed test date of 31 October,
  covering the Marketplace DACH group of CGUs (commerce segment) and
  the Vietnam engineering services CGU (services segment), which also
  had an impairment indicator. Amounts are EUR thousand. Every number
  is recomputed.
- Related templates: Technical Accounting Memo
  (`finance/technical-accounting-memo`), Valuation Report
  (`finance/valuation-report`) for a full stand-alone valuation, Lease
  Accounting Memo (`finance/lease-accounting-memo`) for right-of-use
  assets inside the CGU, Going Concern Assessment
  (`finance/going-concern-assessment`) when the same forecasts are used.
-->

## Document control

<!-- Guidance: Record the test date, the forecast version and the model version. The auditor will compare them with the board-approved budget. -->

| Field | Value |
|---|---|
| Document ID | [IMP-YYYY-NNN] *Example:* IMP-2026-001 |
| Test type | [Annual / Triggered / Both] *Example:* Annual goodwill test of both units; Vietnam also had an indicator |
| Test date | YYYY-MM-DD *Example:* 2026-10-31 (annual test date, same every year); indicator review updated to 2026-12-31 |
| Units tested | [CGUs or groups of CGUs] *Example:* Marketplace DACH (group of CGUs, goodwill); Vietnam engineering services (CGU, goodwill, indicator present) |
| Framework | [IAS 36 / ASC 350 and 360 / both] *Example:* IAS 36; US GAAP comparison in section 10 |
| Forecast source | [Budget or plan version, approval date] *Example:* Board-approved 2027 to 2031 strategic plan, 2026-09-24; reconciled to the final FY2027 budget approved 2026-12-10 before the accounts were signed |
| Model version | [Workbook ID and version] *Example:* MOD-IMP-2026 v1.3 |
| Currency and units | [EUR thousand unless stated] |
| Version | [0.1] |
| Status | [Draft / In review / Final] |
| Owner | [@group-reporting-lead] |
| Approvers/reviewers | [@cfo], [@fp-and-a], [@treasury], [@audit-committee] |
| Last updated | YYYY-MM-DD |
| Classification | [Confidential] |

### Approvals

| Role | Name | Decision | Date |
|---|---|---|---|
| Preparer, group reporting | [@name] | [Prepared] | YYYY-MM-DD |
| Chief financial officer | [@name] | [Approve / Return] | YYYY-MM-DD |
| Audit committee | [Chair] | [Noted / Challenged] | YYYY-MM-DD |

### Revision history

| Version | Date | Author | Change summary |
|---|---|---|---|
| 0.1 | YYYY-MM-DD | [@name] | Draft on budget version |
| 0.5 | YYYY-MM-DD | [@name] | *Example:* Discount rate updated to year-end market data |
| 1.0 | YYYY-MM-DD | [@name] | *Example:* Approved by CFO, presented to audit committee |

## Contents

<!-- Guidance: Keep this list aligned with the headings. -->

1. [Summary and conclusion](#1-summary-and-conclusion)
2. [Scope, triggers and test timing](#2-scope-triggers-and-test-timing)
3. [CGU identification and goodwill allocation](#3-cgu-identification-and-goodwill-allocation)
4. [Carrying amount](#4-carrying-amount)
5. [Value in use](#5-value-in-use)
6. [Discount rate](#6-discount-rate)
7. [Fair value less costs of disposal](#7-fair-value-less-costs-of-disposal)
8. [Sensitivity and headroom](#8-sensitivity-and-headroom)
9. [Impairment loss and allocation](#9-impairment-loss-and-allocation)
10. [US GAAP differences](#10-us-gaap-differences)
11. [Disclosure](#11-disclosure)
12. [Controls, governance and evidence](#12-controls-governance-and-evidence)
13. [Glossary and references](#13-glossary-and-references)
14. [Standard and licence note](#standard-and-licence-note)

## 1. Summary and conclusion

<!-- Guidance: Write this last. For each unit: carrying amount, recoverable amount, basis (VIU or FVLCOD), headroom or loss, and the assumption with the least room. -->

State the result for every unit tested, the basis of the recoverable
amount, the headroom in money and as a percentage of carrying amount,
and the change in each key assumption that would remove the headroom.
If any reasonably possible change would cause an impairment, say so,
because it drives a specific disclosure.

*Example:* At the annual test date of 2026-10-31 the Marketplace DACH
group of CGUs carries goodwill of EUR 21,000 thousand and a total
carrying amount of EUR 42,500 thousand. Its value in use is EUR 46,377
thousand, above fair value less costs of disposal of EUR 45,300
thousand, so the recoverable amount is the value in use and headroom is
EUR 3,877 thousand (9.1%). No impairment arises. Headroom is eliminated
by a rise of about 0.7 percentage points in the post-tax discount rate,
or a fall of about 1.0 percentage point in terminal growth, which
management considers reasonably possible, so the sensitivity is
disclosed. The Vietnam engineering services CGU lost its external
client business when the group converted Corvid Commerce Vietnam LLC
into a captive cost-plus service centre; its recoverable amount of
EUR 9,400 thousand is below the carrying amount of EUR 12,000 thousand,
and an FY2026 impairment loss of EUR 2,600 thousand is recognised, of
which EUR 2,000 thousand reduces goodwill to zero. No new indicator
arose between 2026-10-31 and 2026-12-31.

| Unit | Carrying amount | Recoverable amount | Basis | Headroom or (loss) | Least headroom assumption |
|---|---|---|---|---|---|
| Marketplace DACH *(Example)* | 42,500 | 46,377 | VIU | 3,877 (9.1%) | Discount rate (+0.68 pp) |
| Vietnam engineering services *(Example)* | 12,000 | 9,400 | VIU | (2,600) | Not applicable, impaired |
| [Unit] | [Amount] | [Amount] | [VIU / FVLCOD] | [Amount] | [Assumption] |

## 2. Scope, triggers and test timing

<!-- Guidance: List which assets need an annual test and which were tested because of an indicator. Pitfall: testing goodwill on the annual date but missing an indicator in another quarter, such as a market capitalisation below net assets. -->

Goodwill, intangible assets with an indefinite useful life and
intangible assets not yet available for use need an annual test,
whether or not an indicator exists (IAS 36 paragraphs 9 and 10). Other
assets are tested when an indicator exists at the reporting date (IAS
36 paragraphs 12 to 14). Record the annual test date for each unit;
it may differ between units but must be the same every year for a
given unit (IAS 36 paragraph 96).

Test at the same date every year, and repeat the indicator review at
the reporting date: an event between the annual test date and the year
end (here between 31 October and 31 December) can require a further
test. Document the indicator review even when nothing is found. Consider
external sources such as market interest rates, market capitalisation
compared with net assets and adverse changes in the market, and
internal sources such as performance below budget, restructuring plans
and physical damage.

| Indicator checked | Evidence at test date *(Example)* | Indicator present? |
|---|---|---|
| Market capitalisation below net assets | Market capitalisation of Corvid Commerce Group plc (London shares and New York ADSs) of EUR [x] million against consolidated net assets of EUR [y] million at the test date: above (ratio [z]x) | No |
| Increase in market interest rates | Long-term EUR rates broadly unchanged in 2026 | No |
| Performance below budget | Marketplace DACH EBITDA 4,600 vs budget 4,900 (94%) | Monitored, not an indicator alone |
| Loss of external clients in Vietnam | Board decision of 2026-10-15 to end all external client contracts of the Vietnam engineering business by 2026-12-31 and serve only the group at cost plus | Yes, Vietnam engineering services CGU |
| Adverse regulatory or technological change | None identified | No |
| [Indicator] | [Evidence] | [Yes / No] |

```mermaid
flowchart TD
  A[Reporting date] --> B{Goodwill, indefinite-life or<br/>not-yet-available intangible?}
  B -- Yes --> T[Annual test on fixed date]
  B -- No --> C{Indicator of impairment?}
  C -- No --> N[Document review, no test]
  C -- Yes --> T2[Triggered test]
  T --> R[Estimate recoverable amount]
  T2 --> R
  R --> D{Recoverable amount below<br/>carrying amount?}
  D -- No --> H[Record headroom and sensitivity]
  D -- Yes --> L[Recognise and allocate loss]
```

## 3. CGU identification and goodwill allocation

<!-- Guidance: Explain why the CGUs are defined as they are and where goodwill is monitored. Pitfall: defining CGUs by legal entity when cash inflows are generated jointly across entities, or allocating goodwill to a level above an operating segment. -->

Identify the smallest group of assets that generates largely
independent cash inflows (IAS 36 paragraphs 66 to 73). Look at how
management monitors operations and makes decisions about continuing or
disposing of assets, and whether an active market exists for the
output of a group of assets even if the output is used internally.
Keep CGU definitions consistent from period to period unless a change
is justified and disclosed.

Under IAS 36 paragraphs 70 and 71, a unit whose output is used
internally is still a CGU when an active market exists for that output;
measure its cash inflows at arm's-length prices rather than the
internal transfer price. This matters for the Vietnam example, whose
only customer from 2027 is the group.

Allocate goodwill to the CGUs or groups of CGUs expected to benefit
from the synergies of the business combination, at the lowest level
at which goodwill is monitored for internal management purposes and
not larger than an operating segment before aggregation (IAS 36
paragraphs 80 to 87). Complete the initial allocation before the end of
the first annual period beginning after the acquisition date (IAS 36
paragraph 84).

| Unit | Composition *(Example)* | Operating segment | Goodwill allocated (EUR thousand) | Origin |
|---|---|---|---|---|
| Marketplace DACH | Online marketplaces in Germany, Austria and Switzerland, shared fulfilment and platform | Commerce | 21,000 | Acquisition of a fictional German marketplace in 2023 |
| Vietnam engineering services | Software engineering and customer-support centre of Corvid Commerce Vietnam LLC, including the external client business acquired with a fictional Ho Chi Minh City software studio | Services | 2,000 | Acquisition of the studio by Corvid Commerce Vietnam LLC in 2024, merged into the entity |
| Marketplace UK | UK online marketplace | Commerce | 0 | Organic |
| [Unit] | [Composition] | [Segment] | [Amount] | [Origin] |

## 4. Carrying amount

<!-- Guidance: Build the carrying amount on the same basis as the cash flows. If a cash flow is excluded, exclude the related asset or liability, and the reverse. Pitfall: including right-of-use assets but deducting lease payments in the cash flows, which double counts the lease. -->

Include the assets that can be attributed directly, or allocated on a
reasonable and consistent basis, to the unit and that generate the
cash flows used in the recoverable amount (IAS 36 paragraphs 75 to 79).
Exclude recognised liabilities unless the recoverable amount cannot be
determined without them. Shared corporate assets, such as a group
platform or headquarters, are allocated where a reasonable basis
exists; otherwise apply the stepped approach in IAS 36 paragraph 102.

Right-of-use assets need care. The usual approach includes right-of-use
assets in the carrying amount, excludes lease liabilities, and excludes
lease payments from the cash flows because they are financing flows.
The discount rate then needs to reflect lease debt in the capital
structure, and the terminal-period cash flows need to include the cost
of replacing leased assets after their current lease terms (see the
lease replacement row in section 5.1). Omitting that cost overstates
value in use, often by more than the headroom.

| Component | Marketplace DACH (EUR thousand) *(Example)* | Vietnam engineering services (EUR thousand) *(Example)* |
|---|---|---|
| Goodwill | 21,000 | 2,000 |
| Other intangible assets (brands, customer lists, software) | 9,000 | 3,000 (acquired customer contracts and tooling) |
| Property, plant and equipment | 4,500 (fulfilment equipment in the leased Leipzig centre) | 6,000 (Ho Chi Minh City office fit-out, development servers, test devices and IT equipment) |
| Right-of-use assets | 5,500 (Leipzig warehouse and Halle overflow hall) | 1,000 (Ho Chi Minh City office lease) |
| Net working capital | 2,500 | 0 |
| Allocated corporate platform | 0 (platform tested at group level) | 0 |
| Total carrying amount | 42,500 | 12,000 |

*Example check:* Marketplace DACH: 21,000 + 9,000 + 4,500 + 5,500 +
2,500 = 42,500. Vietnam engineering services: 2,000 + 3,000 + 6,000 +
1,000 = 12,000; the Vietnam CGU's working capital is negligible and the
cash flows are prepared before working capital movements.

Reconcile the unit carrying amounts to the consolidated balance sheet
before the test is reviewed, because a unit total that exceeds the
group line is an error in the model, not a judgement. *Example
reconciliation at 2026-12-31, after the Vietnam loss in section 9:*
goodwill and intangible assets of the two units are 30,000 (DACH) plus
2,820 (Vietnam, 3,000 less 180 of the loss), capitalised development
of 4,806 is tested with the group platform, and other software
licences are 374, giving the group's 38,000 (30,000 + 2,820 + 4,806 +
374). Right-of-use assets of the two units are 5,500 plus 940 (1,000
less 60), and office leases of CC-UK, CC-US and the parent make up the
remaining 1,160 of the group's 7,600. Lease liabilities of 8,000 are
excluded from the carrying amount, consistent with the cash flows.

## 5. Value in use

<!-- Guidance: Present the cash flow projections, the basis for each key assumption, the terminal value and the discounting. Pitfall: including cash flows from future restructurings or capacity expansions that are not yet committed, or using the growth-case plan instead of the approved budget. -->

Base cash flow projections on reasonable and supportable assumptions,
on the most recent budgets or forecasts approved by management, and
for a period of no more than five years unless a longer period can be
justified (IAS 36 paragraphs 33 to 38). Exclude cash flows from
restructurings the entity is not yet committed to and from improving or
enhancing the asset's performance (IAS 36 paragraph 44), as well as
financing and income tax flows (IAS 36 paragraph 50). Extrapolate beyond
the forecast period with a steady or declining growth rate that does
not exceed the long-term average for the products, industries or
countries, unless justified.

Test the forecasts against history. Compare the last three years of
budgets with actual results and explain any systematic optimism. Where
the budget includes a recovery, describe the specific actions that
support it.

### 5.1 Cash flow projections, Marketplace DACH

| EUR thousand | 2027 | 2028 | 2029 | 2030 | 2031 |
|---|---|---|---|---|---|
| EBITDA (excluding lease payments) *(Example)* | 5,200 | 5,700 | 6,150 | 6,550 | 6,850 |
| Cash taxes on operating profit *(Example)* | (1,100) | (1,250) | (1,400) | (1,500) | (1,600) |
| Capital expenditure, maintenance only *(Example)* | (800) | (800) | (800) | (850) | (850) |
| Change in net working capital *(Example)* | (300) | (250) | (200) | (150) | (100) |
| Free cash flow *(Example)* | 3,000 | 3,400 | 3,750 | 4,050 | 4,300 |
| Lease replacement allowance, terminal year only *(Example)* | | | | | (550) |
| Normalised terminal cash flow *(Example)* | | | | | 3,750 |

*Example check:* each column adds up; for 2027, EBITDA of 5,200 less
taxes of 1,100, capital expenditure of 800 and working capital of 300
gives 3,000. The lease replacement allowance reflects the right-of-use
assets of 5,500 in the carrying amount, renewed on an average lease
cycle of about 10 years (5,500 / 10 = 550 a year). In the explicit
years the existing right-of-use assets, which are in the carrying
amount, provide the leased capacity and their payments are excluded as
financing flows. In perpetuity those leases must be renewed, so the
terminal cash flow bears the replacement cost.

### 5.2 Key assumptions and their basis

| Assumption | Value *(Example)* | Basis |
|---|---|---|
| Net revenue | 41,600 in 2027 (of the FY2027 commerce budget of 54,000; the rest is Marketplace UK), growing 4.5% in 2028, 4.0% in 2029, 3.5% in 2030 and 3.0% in 2031 to 48,197 | Budget 2027; plan 2028 to 2031; 2026 latest estimate 39,800; three-year history 5.2% a year |
| Unit EBITDA margin on net revenue, before group platform and head-office costs | 12.5% rising to 14.2% (5,200 / 41,600 and 6,850 / 48,197) | Operating leverage on fixed fulfilment cost; 2026 latest estimate 11.6% (4,600 / 39,800) |
| Maintenance capital expenditure | 800 to 850 a year | Asset register replacement cycle |
| Terminal growth rate | 2.0% | Long-term inflation expectations for the euro area; below the plan's final-year growth |
| Post-tax discount rate | 9.5% | Section 6 |
| Forecast accuracy check | Budget achieved 94% to 101% of EBITDA in 2024 to 2026 | FP&A variance history (`finance/variance-analysis`) |

### 5.3 Discounting

The value in use with a five-year explicit period and a growing
perpetuity is:

$$
VIU = \sum_{t=1}^{5} \frac{FCF_t}{(1+r)^{t}} + \frac{FCF_5 \times (1+g)}{(r-g)\,(1+r)^{5}}
$$

The example uses end-of-year discounting. A mid-year convention would
raise the value in use; choose one convention, state it and keep it.

| EUR thousand | 2027 | 2028 | 2029 | 2030 | 2031 | Terminal |
|---|---|---|---|---|---|---|
| Free cash flow *(Example)* | 3,000 | 3,400 | 3,750 | 4,050 | 4,300 | 51,000 |
| Discount factor at 9.5% *(Example)* | 0.9132 | 0.8340 | 0.7617 | 0.6956 | 0.6352 | 0.6352 |
| Present value *(Example)* | 2,740 | 2,836 | 2,856 | 2,817 | 2,731 | 32,397 |

*Example check:* the terminal value at the end of 2031 uses the
normalised terminal cash flow: 3,750 x 1.02 / (0.095 - 0.02) = 3,825 /
0.075 = 51,000. Its present value is 51,000 / 1.095^5 = 32,397. The
five explicit years add to 13,980, so value in use is 13,980 + 32,397
= 46,377. The terminal value is 69.9% of value in use, which is usual for a
growing business but means the terminal assumptions deserve the
closest review. Without the lease replacement allowance the value in
use would be 51,128, which shows how much the allowance matters.

## 6. Discount rate

<!-- Guidance: Build the rate from market inputs for a participant in the unit's business, not from the entity's own borrowing. Disclose the pre-tax rate. Pitfall: using the group rate for a unit in a riskier country or currency. -->

The rate should reflect current market assessments of the time value
of money and the risks specific to the asset for which the cash flows
have not been adjusted (IAS 36 paragraphs 55 to 57 and A15 to A21). In
practice most entities start from a weighted average cost of capital
for a market participant, built with the capital asset pricing model,
and avoid double counting risks already reflected in the cash flows.
The standard is framed in pre-tax terms; when the model uses post-tax
cash flows and a post-tax rate, derive the pre-tax rate iteratively so
that it gives the same value in use, and disclose it.

$$
WACC = \frac{E}{D+E} \, k_e + \frac{D}{D+E} \, k_d \, (1 - t)
$$

$$
k_e = r_f + \beta \times ERP + \text{specific premium}
$$

| Input | Value *(Example)* | Source |
|---|---|---|
| Risk-free rate, EUR 20-year government yield | 3.0% | Market data at 2026-10-31 |
| Equity beta, relevered | 1.20 | Median of a peer group of listed European e-commerce companies, relevered to target leverage |
| Equity risk premium | 5.5% | Range of published survey and implied estimates |
| Company and forecast risk premium | 1.4% | Execution risk in the margin expansion plan |
| Cost of equity | 11.0% | 3.0% + 1.20 x 5.5% + 1.4% |
| Pre-tax cost of debt (including lease debt) | 5.0% | Market-participant BBB-range borrowing |
| Tax rate | 30.0% | German combined corporate and trade tax, approximately |
| Post-tax cost of debt | 3.5% | 5.0% x (1 - 0.30) |
| Debt weighting D / (D + E) | 20% | Peer-group median including lease liabilities |
| Post-tax WACC | 9.5% | 0.80 x 11.0% + 0.20 x 3.5% |
| Pre-tax discount rate (iterative) | 12.5% | Rate that gives the same VIU on pre-tax cash flows |

*Example check:* 0.80 x 11.0% = 8.8% and 0.20 x 3.5% = 0.7%, so WACC is
9.5%. For the iteration, pre-tax cash flow is free cash flow plus the
cash taxes in section 5.1: 4,100, 4,650, 5,150, 5,550 and 5,900,
with a terminal pre-tax flow of 3,750 + 1,600 = 5,350 growing at 2.0%.
The rate that discounts those flows to the value in use of 46,377 is
12.53%, disclosed as 12.5%. Use the same pre-tax flows when you check
the disclosed rate, and keep the iteration in the model.

## 7. Fair value less costs of disposal

<!-- Guidance: Estimate FVLCOD when VIU is below the carrying amount, when it is likely to be higher, or always if your policy says so. Measure fair value under IFRS 13 and state the hierarchy level. Pitfall: using a market multiple from a different business model or size. -->

Recoverable amount is the higher of value in use and fair value less
costs of disposal (IAS 36 paragraph 18). If either exceeds the carrying
amount there is no impairment and the other need not be estimated (IAS
36 paragraph 19). Measure fair value under IFRS 13 from the perspective
of market participants, and state the fair value hierarchy level and
valuation technique (IAS 36 paragraph 134(e)). Costs of disposal are
incremental costs directly attributable to the disposal, excluding
finance costs and income tax.

| Step | Value *(Example)* | Basis |
|---|---|---|
| EBITDA 2026, latest estimate at the test date (EUR thousand) | 4,600 | Ten months of actuals plus the November and December forecast |
| EV / EBITDA multiple | 10.0x | Median of five listed peers and two transactions, adjusted for size; see Comparable Companies Analysis (`finance/comparable-companies-analysis`) |
| Enterprise value | 46,000 | 4,600 x 10.0 |
| Costs of disposal | (700) | Advisory, legal and separation costs |
| FVLCOD | 45,300 | Level 3 (unobservable adjustments to the multiple) |

*Example conclusion:* FVLCOD of EUR 45,300 thousand is below value in
use of EUR 46,377 thousand, so the recoverable amount is value in use.
Both exceed the carrying amount. Because the multiple is applied to an
EBITDA that excludes lease payments, the enterprise value is comparable
with a carrying amount that excludes lease liabilities.

## 8. Sensitivity and headroom

<!-- Guidance: Show the effect of reasonably possible changes in each key assumption, one at a time and in combination, and the break-even value of each. Pitfall: choosing sensitivity ranges so narrow that they never matter. -->

Calculate headroom as recoverable amount less carrying amount. For each
key assumption, show the break-even value (the value at which headroom
is zero) and judge whether a change of that size is reasonably
possible. Where it is, IAS 36 paragraph 134(f) requires disclosure of
the headroom, the assumption value and the change that would eliminate
the headroom. Present a two-way table for the discount rate and the
terminal growth rate, which usually dominate the result.

$$
\text{Headroom} = \text{Recoverable amount} - \text{Carrying amount}
$$

| Sensitivity, Marketplace DACH | VIU (EUR thousand) | Headroom (EUR thousand) | Break-even value |
|---|---|---|---|
| Base case *(Example)* | 46,377 | 3,877 (9.1%) | Not applicable |
| Post-tax discount rate +1.0 pp to 10.5% *(Example)* | 40,920 | (1,580) | 10.18% (+0.68 pp) |
| Terminal growth -1.0 pp to 1.0% *(Example)* | 42,285 | (215) | 1.06% (-0.94 pp) |
| All cash flows, including the terminal flow, -10% *(Example)* | 41,739 | (761) | -8.4% |

### 8.1 Two-way table: headroom in EUR million

| Discount rate / terminal growth | 1.0% | 2.0% | 3.0% |
|---|---|---|---|
| 8.5% *(Example)* | 5.5 | 11.0 | 18.6 |
| 9.5% *(Example)* | (0.2) | 3.9 | 9.2 |
| 10.5% *(Example)* | (4.7) | (1.6) | 2.4 |

*Example conclusion:* the post-tax discount rate has the least room.
A rise of 0.7 percentage points is well within the range of movements
in the peer-group WACC over the last five years, and a fall of about
one percentage point in terminal growth or of about 8% in cash flows
would also remove the headroom. Management considers each change
reasonably possible and discloses all three under IAS 36 paragraph
134(f). The combination of a 10.5% rate and 1.0% growth would produce
an impairment of about EUR 4.7 million, which is shown to the audit
committee as a downside scenario. Thin headroom is also a reason to
present the goodwill estimate as a source of estimation uncertainty in
the judgements and estimates note.

## 9. Impairment loss and allocation

<!-- Guidance: Recognise the loss and allocate it first to goodwill, then pro rata to the other assets in scope, without taking any asset below the highest of its FVLCOD, its VIU and zero. Pitfall: allocating loss to working capital or financial assets, which are outside IAS 36. -->

When the recoverable amount of a unit is below its carrying amount,
allocate the loss first to reduce goodwill allocated to the unit, then
to the other assets in the scope of IAS 36 pro rata to their carrying
amounts (IAS 36 paragraphs 104 and 105). No asset may be reduced below
the highest of its fair value less costs of disposal (if measurable),
its value in use (if determinable) and zero; reallocate any excess to
the remaining assets. Recognise the loss in profit or loss, or as a
revaluation decrease for revalued assets. Goodwill impairment is never
reversed (IAS 36 paragraph 124); other assets are assessed for reversal
indicators at each reporting date (IAS 36 paragraphs 110 to 123).

*Example, Vietnam engineering services:* from 2027 the unit's only
customer is the group, so its value in use is built from arm's-length
prices for comparable outsourced engineering and support services, as
supported by the transfer pricing benchmark, rather than from the
external client margins that justified the 2024 goodwill. The
recoverable amount is EUR 9,400 thousand (value in use; fair value less
costs of disposal is EUR 8,700 thousand).
The loss is EUR 12,000 - 9,400 = EUR 2,600 thousand. Goodwill of
EUR 2,000 thousand is written off first. The remaining EUR 600
thousand is allocated pro rata over the other assets with a combined
carrying amount of EUR 10,000 thousand.

| Asset | Carrying amount before | Allocation | Loss allocated | Carrying amount after | Floor check |
|---|---|---|---|---|---|
| Goodwill *(Example)* | 2,000 | First | 2,000 | 0 | Not applicable |
| Acquired customer contracts and tooling *(Example)* | 3,000 | 30% of 600 | 180 | 2,820 | No separate FVLCOD |
| Property, plant and equipment *(Example)* | 6,000 | 60% of 600 | 360 | 5,640 | Above FVLCOD of the fit-out, servers and IT equipment of 5,300 |
| Right-of-use assets *(Example)* | 1,000 | 10% of 600 | 60 | 940 | No separate FVLCOD |
| Total | 12,000 | | 2,600 | 9,400 | |

The FY2026 loss is presented under IAS 1 in the FY2026 statements.
Under IFRS 18, which applies from 2027-01-01, impairment losses on
operating assets and goodwill are presented in the operating category,
including in the restated FY2026 comparatives.
Check the group mapping in IFRS 18 Transition Plan
(`finance/ifrs-18-transition-plan`). Consider the tax effect: goodwill
impairment is often not deductible, while impairment of other assets
may reduce deferred tax liabilities; coordinate with Income Tax
Provision (`finance/income-tax-provision`).

## 10. US GAAP differences

<!-- Guidance: Complete when a US GAAP reporting package or US listing needs it. Explain the different test structure and run the numbers through it. Pitfall: testing goodwill before the long-lived asset group, which reverses the required order. -->

US GAAP tests goodwill at the reporting unit level under ASC 350-20,
with an optional qualitative assessment (ASC 350-20-35-3A) followed by
a single quantitative comparison of the reporting unit's fair value with
its carrying amount (ASC 350-20-35-8), after ASU 2017-04 removed the
former second step. The loss equals the excess of carrying amount over
fair value, limited to the goodwill of the reporting unit.

Long-lived assets held and used are grouped at the lowest level with
identifiable cash flows (ASC 360-10-35-23) and tested only on a
triggering event (ASC 360-10-35-21). The first step compares the
carrying amount with undiscounted cash flows (ASC 360-10-35-17); only if
that fails is a loss measured as carrying amount less fair value. Test
the asset group under ASC 360 before testing goodwill of the reporting
unit that contains it (ASC 350-20-35-31). Indefinite-lived intangibles
are tested under ASC 350-30-35-18. Reversals of impairment losses are
not permitted for assets held and used.

| Topic | IAS 36 | ASC 350 and 360 | Effect in the example |
|---|---|---|---|
| Level of goodwill test | CGU or group of CGUs, not above operating segment | Reporting unit (operating segment or one level below) | Same unit, Marketplace DACH |
| Recoverable measure | Higher of VIU and FVLCOD | Fair value (no deduction for disposal costs) | Marketplace DACH fair value about EUR 46,000 thousand (FVLCOD 45,300 plus disposal costs 700); above 42,500 |
| Long-lived asset test | Single step, discounted | Undiscounted recoverability test, then fair value | Vietnam: undiscounted cash flows of the asset group exceed its carrying amount of 10,000, so no loss on long-lived assets; the goodwill test then compares fair value with carrying amount |
| Reversal | Allowed except goodwill | Not allowed | None |

*Example note:* under US GAAP the Vietnam result differs, because the
undiscounted recoverability test passes while the discounted IFRS test
fails. With a reporting unit fair value of about EUR [8,700 plus
estimated disposal costs] thousand, still well below the carrying
amount of EUR 12,000 thousand,
the goodwill loss is capped at the EUR 2,000 thousand of goodwill, so
the US GAAP loss is EUR 2,000 thousand against EUR 2,600 thousand under
IAS 36. Prepare the US GAAP reporting package from
a separate calculation and reconcile the difference.

## 11. Disclosure

<!-- Guidance: Draft the note text from this memo. Pitfall: boilerplate key-assumption wording with no values, or omitting the reasonably-possible-change disclosure when headroom is thin. -->

Map each unit to the disclosure requirements of IAS 36 paragraphs 126
to 137: losses and reversals by class of asset and segment, the events
that led to a material loss, the basis of recoverable amount, and for
each unit with significant goodwill the carrying amount of goodwill,
key assumptions, the approach to each, the projection period, growth
and discount rates, and sensitivity where applicable (IAS 36 paragraph
134). Add the significant judgement and estimation-uncertainty
disclosures required by the presentation standard.

| Disclosure | Marketplace DACH *(Example)* | Vietnam engineering services *(Example)* |
|---|---|---|
| Goodwill carrying amount after test | 21,000 | 0 |
| Basis of recoverable amount | VIU | VIU |
| Projection period | 5 years | 5 years at arm's-length cost-plus pricing |
| Terminal growth / pre-tax discount rate | 2.0% / 12.5% | [rate] / [rate] |
| Reasonably possible change disclosure | Yes: discount rate +0.68 pp, terminal growth -0.94 pp or cash flows -8.4% removes headroom | Not applicable, impaired to recoverable amount |
| Impairment loss recognised | 0 | 2,600 (goodwill 2,000; other assets 600) |
| Event leading to loss | Not applicable | End of external client contracts and conversion to a captive cost-plus service centre (board decision 2026-10-15) |

## 12. Controls, governance and evidence

<!-- Guidance: List the controls over the forecast, the model, the discount rate and the review. Auditors focus on management review controls with documented precision. -->

Impairment tests rely on estimates, so the controls that matter are
those over inputs and review. Record who prepared the forecasts and
who approved them, how the model was checked, where each market input
came from, and what the reviewer challenged. Keep the evidence with the
memo so the auditor can follow the review. Link the controls to the
Risk and Control Matrix (`compliance/risk-control-matrix`), and if an
external valuer was used, record their scope, independence and the
procedures performed on their work.

| Control ID | Control | Owner | Evidence |
|---|---|---|---|
| IMP-C-001 *(Example)* | Forecasts reconciled to the board-approved budget and plan | [@fp-and-a] | Reconciliation in model tab 2 |
| IMP-C-002 *(Example)* | Model integrity review (formulas, links, version) | [@model-reviewer] | Review log for MOD-IMP-2026 v1.3 |
| IMP-C-003 *(Example)* | Discount rate inputs sourced and approved | [@treasury] | Market data file and sign-off |
| IMP-C-004 *(Example)* | CFO review with documented challenge of key assumptions and threshold for investigation | [@cfo] | Review memo |
| IMP-C-005 *(Example)* | Indicator review at each quarter end | [@group-reporting] | Quarterly checklist (`finance/month-end-close-checklist`) |

## 13. Glossary and references

<!-- Guidance: Define terms in your own words as used in this memo. Note any pending changes to the standards. -->

### 13.1 Glossary

| Term | Meaning in this memo |
|---|---|
| Cash-generating unit (CGU) | Smallest group of assets that produces cash inflows largely independent of other assets |
| Reporting unit (US GAAP) | Operating segment or one level below, used for the goodwill test |
| Recoverable amount | Higher of value in use and fair value less costs of disposal |
| Value in use (VIU) | Present value of future cash flows expected from the unit in its current condition |
| Fair value less costs of disposal (FVLCOD) | Price market participants would pay for the unit, less incremental selling costs |
| Headroom | Recoverable amount less carrying amount |
| Terminal value | Value of cash flows beyond the explicit forecast period |
| Break-even value | Value of an assumption at which headroom is zero |
| Corporate asset | Shared asset, such as a platform or headquarters, that does not generate independent cash inflows |

### 13.2 References

| Reference | Version or date | Use |
|---|---|---|
| IAS 36 Impairment of Assets (IFRS Foundation) | Current; cited by paragraph number only | Test structure |
| IFRS 13 Fair Value Measurement | Current | FVLCOD |
| IFRS 18 Presentation and Disclosure in Financial Statements | Effective 2027-01-01 | Presentation |
| IASB project Business Combinations: Disclosures, Goodwill and Impairment | Exposure draft published March 2024 proposing amendments to IFRS 3 and IAS 36; check the IASB work plan for final amendments and effective date | Pending changes |
| FASB ASC Topics 350 and 360; ASU 2017-04 | As amended; cited by paragraph number only | US GAAP comparison |
| Valuation Report (`finance/valuation-report`) | This collection | Full valuation where needed |
| Technical Accounting Memo (`finance/technical-accounting-memo`) | This collection | Generic memo format |

## Standard and licence note

Structure aligned with IAS 36 Impairment of Assets and FASB ASC Topics
350 and 360. Standards are cited by name and paragraph number only; no
text, definitions or illustrative examples from the IFRS Foundation or
FASB are reproduced or paraphrased, and IFRS is a trademark of the IFRS
Foundation used nominatively. The WACC, CAPM and discounting formulas
are general finance arithmetic written in original form. Obtain the
current standards for the normative requirements and check pending
amendments and effective dates. Corvid Commerce Group and every figure
are fictional and original. This template is original text written for
this collection and is not accounting or valuation advice. Template
licence: MIT.