Goodwill in Associate and Investment in Associate

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This topic contains 6 replies, has 6 voices, and was last updated by Avatar of MikeLittle MikeLittle 6 months, 2 weeks ago. This post has been viewed 634 times

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  • Avatar of gracie
    gracie
    Participant
    • Topics: 1
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    Hello Sir,
    I want to find out when goodwill in Associate is calculated and when it is not cos mostly we only do investment in Associate.
    thank you.


    avatar
    halfbear
    Member
    • Topics: 2
    • Replies: 36

    sub – goodwill (as we have over 50%)
    associate – investment (as we only have 20-50%)

    you won’t have goodwill on an associate as far as I am aware, just the investment


    avatar
    vedavyas
    Participant
    • Topics: 37
    • Replies: 58

    There is goodwill in the associate and you do it only if you suspect a gain on bargain purchase( formerly known as Negative Goodwill) just do the math on your calculator and see if there is any gain on bargain purchase, if not then don’t waste time preparing one. Most cases there is no gain on bargain purchase.


    Avatar of MikeLittle
    MikeLittle
    Participant
    • Topics: 0
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    You would normally calculate “goodwill” on the acqn of an Assoc but it’s correctly called “premium on acqn” Check out the OT working W5A


    Avatar of Shunmas
    Shunmas
    Participant
    • Topics: 17
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    @gracie @halfbear @vedavyas

    Hello !

    There IS Goodwill in Associate (A) if the cost of investment is more than the net asset assets of A acquired.

    As far as the Investment in Associate is concerned, there are two ways (methods, if you wish) to calculate it:

    Please refer to June 2009 question: “Pacemaker

    Method 1:

    $’000

    Holding % x Net Assets @ Reporting Date
    (30% x $340)


    $102
    + Goodwill


    42


    144

    Method 2:

    Cost of Investment—$120
    + 30% x (340 – 260)—-24


    144

    Choose whichever you like and enjoy.

    @MikeLittle

    Merry X’Mas

    large-smiley-049.gif


    avatar
    muhammadhossam
    Participant
    • Topics: 11
    • Replies: 7

    Please I want to know the accounting treatment for that kind of goodwill should it goes to Income statement …Thanks


    Avatar of MikeLittle
    MikeLittle
    Participant
    • Topics: 0
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    No – there is NO goodwill in an associate! Any premium paid over the share of fair valued assets acquired is called “premium on acquisition”

    In the parent’s own accounts, the cost of the investment remains (less any subsequent impairments)

    In the consolidated accounts, the investment in the associate is calculated as Cost of investment + share of post acquisition retained earnings – any impairments

    Those impairments are deducted in arriving at consolidated retained earnings

    Does that help?

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