In an article by Sue Mitchell entitled ‘Undies, sheets key to Pacific recovery’ that appeared in The Australian Financial Review on 27 August 2014 (p. 15), it was reported that:

Pacific Brands’ fourth chief executive in seven years is counting on higher sales of Bonds underwear and Sheridan sheets to underpin earnings growth, as the clothing and textiles distributor sells assets and faces new headwinds from the weaker Australian dollar . . . David Bortolussi confirmed on Tuesday earnings in 2015 could fall to the lowest level since 2004 despite six years of restructuring and cost-cutting under his predecessors Paul Moore, Sue Morphet and John Pollaers as gross margins came under pressure and costs continued to rise . . . ‘We’ve said it will be materially down but not catastrophic,’ Mr Bortolussi told The Australian Financial Review on Tuesday after reporting a 28.2 percent fall in underlying net profit to $53.0 million in 2014 and a bottom line loss of $224.5 million, the fourth annual loss in six years . . . While sales rose 3.8 per cent to $1.322 billion in 2014, earnings before interest tax and one-off items fell 25.3 per cent to $91.2 million, in line with guidance. Pacific Brands also booked one-off costs of $312 million, including goodwill impairment charges of $242.3 million and restructuring costs of $32.9 million. These one-off costs took total impairment charges and restructuring costs over the last six years to more than $1.2 billion and led to a bottom-line loss of $224.5 million in 2014 compared with a $73.8 million profit in 2013. The company withheld its final dividend.

REQUIRED

1. At what point in time should goodwill impairment losses be recognized?

2. How would management determine whether a goodwill impairment loss should be recognized?