Impairment Calculator
for Retail
Test retail store portfolios, brand intangibles, and goodwill for impairment under IAS 36. Input store-level cash flows and calculate value in use for individual CGUs or groups of CGUs.
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IAS 36 impairment testing for Retail
Retail impairment testing centres on two asset categories that dominate the balance sheet: store-related right-of-use assets (post-IFRS 16) and goodwill from acquisitions. A mid-market retailer with 50 to 200 stores may carry hundreds of millions in ROU assets, each of which falls within IAS 36's scope when indicators exist. Goodwill from acquiring competing chains or brands requires annual testing under IAS 36.10 regardless of performance. The combination creates a high-volume impairment testing exercise that demands structured processes. Without them, both preparers and auditors risk missing indicators at individual store level while focusing only on group-level performance.
CGU identification in retail requires careful thought. IAS 36.66 asks for the smallest group of assets generating independent cash inflows. For a retailer, this is often the individual store, because each store generates its own revenue from walk-in customers. But complications arise with click-and-collect models, distribution centres serving multiple stores, and brand intangibles that drive footfall across the entire chain. IAS 36.100 requires corporate assets (such as a central warehouse or head office) to be allocated to CGUs on a reasonable basis. Where a brand intangible can't be allocated to individual stores, it gets tested at the group-of-CGUs level per IAS 36.80. Auditors should map the CGU structure at planning stage and challenge any changes from prior year, documenting why the revised structure better reflects how cash flows are generated.
Regulators have flagged several retail-specific findings. The FRC in the UK and the AFM in the Netherlands have both noted that retailers' VIU models sometimes use revenue growth rates that exceed independently published retail sector forecasts without adequate explanation. Another recurring finding involves terminal growth rates above long-term GDP growth, which IAS 36.33(c) says should not normally be exceeded without justification. For store-level testing, a common error is failing to include store closure or lease termination costs in the disposal scenario when comparing VIU to FVLCOD. The FVLCOD calculation for a loss-making store should include the cost of exiting the lease, which under IFRS 16 means the remaining lease liability adjusted for any sublease income.
Use this calculator to test individual store CGUs or groups of CGUs. For a single store, input the carrying amount of all assets at that store (ROU asset, fixtures, allocated goodwill). Set the discount rate to reflect retail-sector WACC adjusted for the store's location risk and format. A high-street store in a declining town centre carries different risk from a retail park unit with strong anchor tenants. For the growth rate, European retail has averaged 1.0% to 2.0% real growth over the past decade, but online migration is compressing physical retail growth. Run the model at both store level and group level to check whether goodwill impairment is masked at the higher level by headroom in profitable stores.