traveler 12/11

Karen, I’m answering questions every day, up to 100 per day on topics ranging from F4 (two variants) through to P7 auditing. This is in addition to teaching courses from 09.00 until 17.30 each day

In order that I can get as many as possible of these answered, I naturally will select the easier ones that can be answered in just a few lines. Your posts tend to involve a lot in the way of your question, they demand my time in looking up the relevant exam question and answer, I sometimes have to go onto the internet to find extra depth to the matter, and then I finish up typing a response for 20 minutes.

Further, you do seem to have made an effort to take over the questions on the site! It’s almost reminiscent of Kim Kardashian trying to swamp the internet. It’s beginning to reach the stage where I almost dread opening the P2 pages just knowing that, even though there may be no other posts, I can rely on some from Kerri / Karen.

However, now that’s off my chest, let me get down to trying to respond to at least some of your queries.

This latest one – about grossing up the nci for the notional goodwill in an effort to discover whether there needs to be an impairment of a subsidiary’s assets.

If goodwill attributable on acquisition is calculated as $100,000 and nci (say 20%) is proportional, then no goodwill to nci.

Now, when assessing recoverable amounts and carrying values, we need to consider the “virtual” goodwill attributable to the nci.

In my example above, if $100,000 is attributable to our 80% then the nci virtual goodwill must be a quarter of that = $25,000

This (and the $100,000 goodwill) is added to the carrying value of the recognised assets and that total then compared with recoverable amount.

Invariably, in an exam question, recoverable amount will be lower than the adjusted carrying value so we need to impair. The first asset of the subsidiary to be impaired is the goodwill, but some of that goodwill is virtual / notional goodwill attributable to the nci.

So deduct the full amount of the goodwill from the total amount of the impairment, but only the proportion of the goodwill attributable to the parent is actually recorded.

If, after impairing goodwill and virtual goodwill, there is still more to be impaired from the subsidiary net assets, then the nci will get charged with their share of that surplus impairment

OK?

But