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When the parent acquires % from the subsidiary shares,to calculate goodwill, we subtract from the payments(investment) , which of the followings :
1)the holding portion of the subsidiary shares market price.
2) or the subsidiary net assetsThis is a very confused question from a very confused student – am I right?
Have you watched the free videos and followed the examples in the free course notes?
I think not! There should not be confusion to this extent if you had
Confusion #1 is where you have written “… parent acquires % from the subsidiary shares …”
The shares in the subsidiary are NOT bought FROM the subsidiary
Confusion #2 is where you have written “… we subtract from the payments (investment) …”
We very rarely have to subtract anything from ‘investments’ in order to arrive at the goodwill figure. Where have you got this idea from?
Confusion #3 is in the two alternatives you have given me for this subtraction exercise that isn’t now going to take place
In the rare circumstance when it IS necessary, neither of the two alternatives you have given me is appropriate
Let me suggest …
1 you download and print the free course notes
2 you turn to the start of the consolidations chapters
3 you access the first of the consolidation videos, and
4 you re-start this topic with a clear mind
If you then have confusion, post again!
Hello,
May be my English language, is not so good, also, i started to study the FAR in CPA, and almost finished 80% , then i read the notes of F7 , may be there are some differences between them .
any way , i d think that my question would be better if it was :
what is the goodwill formula, at the acquisition case ?
ThanksCost of acquisition for the parent
plus
Value of nci
That total is then compared with the fair value of the subsidiary’s net assets at the date of acquisition
The difference is goodwill (or, rarely, negative goodwill)
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