consolidated a/c- goodwill

meibakermeibaker Trusted RegularPosts: 481Registered
i am bit confused about goodwill in consolidated a/c
but not sure when shall i use full goodwill?
Q: subsidiary ordinary share is £50,000. purchases consideration £184,000 3 year ago. parent owns 80% of subsidiary, the net assets of subsidary at the date of acqustion is £80,000, 10% of any goodwill arising upon consolidatino is to be written off each year on a straigh-line basis as an impairment loss. so what's the goodwill
i did as following:
purchases consideration ..................................£184,000
less parent % of net assets
of subsidiary ............................80,000x 80% = £64,000
= goodwill ....................................................£120,000
less impairmet loss ................................3 x 12= £36.000
goodwill -parent............................................£108,000

non-controlling interest
fair value of NCI at date of acqusition.............£50,000x20%=£10,000
less NCI share of subsidairy net asset ac acqusition £80,000x20%=£16,000
NCI share of goodwill ........................................................(£6,000)
total goodwill..........................................................£102
but the answer didn't work the second part, i though we have to use full goodwill??
please someone indicate me to the right path please!!!

Comments

  • Steve CollingsSteve Collings Experienced Mentor Posts: 997Registered
    Hi,

    You can only use the 'full' method of goodwill recognition (IFRS 3 revised) when you are told the fair value of the NCI in the subsidiary - you won't be able to work it out from the information given in that Q. Generally AAT papers will continue to examine the proportionate method of goodwill allocation because this is still an option under the revised IFRS 3. If you assume that the fair value of the NCI in the subsidiary is $50 then you can uplift your goodwill to $158,000 and credit NCI in the consolidated statement of financial position with the additional $50. You need to be told the value of the NCI's fair value though!

    Regards
    Steve
  • meibakermeibaker Trusted Regular Posts: 481Registered
    Hi,

    You can only use the 'full' method of goodwill recognition (IFRS 3 revised) when you are told the fair value of the NCI in the subsidiary - you won't be able to work it out from the information given in that Q. Generally AAT papers will continue to examine the proportionate method of goodwill allocation because this is still an option under the revised IFRS 3. If you assume that the fair value of the NCI in the subsidiary is $50 then you can uplift your goodwill to $158,000 and credit NCI in the consolidated statement of financial position with the additional $50. You need to be told the value of the NCI's fair value though!

    Regards
    Steve

    thanks for your reply steve! so i don't need to worry about the full method of goodwill in my december exam?
    it will make life so much easy!
  • Steve CollingsSteve Collings Experienced Mentor Posts: 997Registered
    The last few sittings have seen the DFS paper continue to test proportionate goodwill and I believe the new FNST paper also continues to examine the proportionate method so I wouldn't worry too much about the full method of goodwill recognition.

    However, if you are ever asked to recognise goodwill using the full method, it's simply debit goodwill in the statement of financial position with the fair value of the NCI's share of goodwill and credit NCI in the equity section of the SoFP.

    Regards
    Steve
  • meibakermeibaker Trusted Regular Posts: 481Registered
    The last few sittings have seen the DFS paper continue to test proportionate goodwill and I believe the new FNST paper also continues to examine the proportionate method so I wouldn't worry too much about the full method of goodwill recognition.

    However, if you are ever asked to recognise goodwill using the full method, it's simply debit goodwill in the statement of financial position with the fair value of the NCI's share of goodwill and credit NCI in the equity section of the SoFP.

    Regards
    Steve

    ahhh, thanks steve! hopefully it won't be tested this time around!
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