Advice on Goodwill from Steve

Steve Collings
Steve Collings Registered Posts: 997 Epic contributor 🐘
Hi All,

Just recently I have received several enquiries from students who are concerned about the methods used to calculate goodwill under IFRS 3 (revised) Business Combinations. Some students are under the impression that the AAT will be examining the goodwill calculation using the gross method i.e. where the non-controlling interests (NCIs) share of goodwill is included in non-current assets.

The AATs DFS paper and new FNST paper is still examining goodwill calculations using the proportionate method (the old method) where only the parent's share of goodwill is recognised in the financial statements.

IFRS 3 was revised in 2008 and during the revision process the IASB intimated that they may withdraw the proportionate method - however they did not and instead allowed the proportionate method as an alternative to the gross method.

If (and it is a big 'if') the AAT do examine the gross method in subsequent examinations it is not that much of a big deal. You will need to be told the fair value of the NCIs share of goodwill and simply debit goodwill and credit NCI in the equity section of the position statement.

In all honesty, candidates should still expect to calculate goodwill using the traditional proportionate method!

Kind regards
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