In a year already marked by economic shifts and regulatory tweaks, goodwill impairment is emerging as a hot topic for Australian businesses. With the Australian Accounting Standards Board (AASB) introducing updates to AASB 136 and global uncertainties impacting asset values, understanding goodwill impairment has never been more critical. Whether you’re running an ASX-listed company or managing a growing SME, this is an issue that could directly affect your balance sheet, investor confidence, and future growth strategies.
What Is Goodwill Impairment?
Goodwill arises when a company acquires another business for more than the fair value of its identifiable assets and liabilities—think brand reputation, customer relationships, or intellectual property. While this intangible asset sits on the balance sheet, its value isn’t set in stone. Each year, businesses must assess whether goodwill is still worth what they paid or if it’s taken a hit (an impairment) due to changing circumstances.
- Impairment triggers: Poor financial performance, adverse market conditions, regulatory changes, or losing key customers.
- Accounting standards: Under AASB 136, companies must test goodwill for impairment at least annually, or more frequently if indicators arise.
- Impact: An impairment results in an expense on the income statement, reducing net profit and equity.
In 2025, with rising interest rates and post-pandemic market adjustments, more Australian firms are facing tough impairment reviews. The AASB’s latest guidance emphasizes more rigorous and transparent testing, aiming to protect stakeholders from overvalued acquisitions.
2025 Policy Updates and Market Trends
Several factors are shaking up the goodwill impairment landscape this year:
- Updated AASB guidance: The AASB’s 2025 revisions to AASB 136 increase the scrutiny on assumptions used in impairment tests—particularly around future cash flows and discount rates. This means less room for optimistic forecasts and more pressure to justify valuations.
- ASX enforcement: The Australian Securities and Investments Commission (ASIC) has ramped up enforcement, reviewing company disclosures and challenging those with repeated impairment reversals or vague justifications. Non-compliance can lead to restatements, fines, or reputational damage.
- Sector spotlight: Healthcare, retail, and tech are especially vulnerable this year. For example, several major retail chains have announced significant goodwill write-downs due to changing consumer spending and supply chain issues.
- ESG factors: Environmental, social, and governance (ESG) risks now play a bigger role in impairment testing. Firms with heavy environmental liabilities or social controversies may need to adjust goodwill values downward.
A real-world example: In March 2025, an ASX-listed technology company announced a $120 million goodwill impairment after a major product launch failed to meet expectations. The write-down rattled investors but reflected a more transparent approach under the new standards.
How Should Business Owners Respond?
Goodwill impairment isn’t just an accounting technicality—it can have real consequences for access to finance, share price, and even executive bonuses. Here’s how Australian business leaders are responding in 2025:
- Stronger due diligence: Companies are placing more emphasis on pre-acquisition valuations and stress-testing scenarios to avoid overpaying and future impairments.
- Proactive impairment testing: Rather than waiting for the annual review, many CFOs are running quarterly or event-driven tests, especially in volatile sectors.
- Enhanced disclosure: Transparent communication with investors is key. Leading firms now provide detailed breakdowns of impairment assumptions and their sensitivity to market changes.
- Integration planning: Post-acquisition integration is getting more attention, as successful synergy realization can help protect goodwill from future write-downs.
For SMEs, the focus is often on working closely with auditors and advisers to ensure impairment tests reflect both market realities and the unique strengths of their business.
Looking Ahead: The Strategic Value of Goodwill Management
With the regulatory spotlight shining brighter in 2025, goodwill impairment is no longer a back-office task. It’s a strategic issue that can shape corporate reputation, investor trust, and long-term value creation. Australian businesses that approach impairment testing with rigor and transparency will not only comply with evolving standards, but also demonstrate resilience in a fast-changing market.
