Calculating Goodwill (DFS)

MrUniverse
MrUniverse Registered Posts: 10 New contributor 🐸
in AAT Level 4 (Level 8 in Scotland)
Hi all,

just stuggling a little calculating goodwill for a consolidated Balance Sheet, can anyone explain how to do this please?

Thanks

Comments

  • Rinske
    Rinske Registered Posts: 2,453 Beyond epic contributor 🧙‍♂️
    I'm sure someone will give a better explanation soon, but:

    You calculate the percentage for the parent company, based on the acquired shares.
    (acquired shares divided by total normal shares times 100 or written as a fraction)

    You add up the following, based on that percentage:
    Acquired share capital
    Acquired share premium
    Acquired retained earnings
    Acquired part of the revaluations, if any

    From the original investment amount (usually given as investment in the SoFP) you deduct the total of the above.
    This gives the goodwill for the time of purchase.
    Depending on how long ago this was, you calculate the impairment of goodwill and deduct this from the goodwill at the time of purchase.

    The result is the goodwill which goes directly to non-current assets of the SoFP.

    Hope this helps,
    Rinske
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
    MrUniverse wrote: »
    Hi all,

    just stuggling a little calculating goodwill for a consolidated Balance Sheet, can anyone explain how to do this please?

    Thanks

    i am about to go through this. did you want help on it all or just goodwill
  • Esme
    Esme Registered Posts: 711 Epic contributor 🐘
    look at the thread I have just upped about 'consolidated accounts and goodwill' Clare Fitch explains it really well.
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
    right as Rinske has put everything, i will too as writing it will help get it into my head. You should also search the forum for similar stuff.

    Step 1. establish the control
    Step 2. Work out the net assets of the subsidiary. this includes the share capital and retained earnings at both the date of aquisition and the SOFP date
    Step 3. Goodwill on aquisition. This is the cost of shares acquired less the share of net asets at acquisition (from step 2) it is here any impairment is deducted
    Step 4. Non controlling interest. Share of net assets at aqusition x subsidiary share
    Step 5. Group retained earnings. This is parents reserve + subsidiary group share of post acquisition reserves - goodwill impairment

    hope that helps. maybe that will get it to sink into my head too

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