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Dear Tutor,
I have noticed that impairment of goodwill attributable to parent when NCI is proportionate could be calculated in different ways. I am reffering to the questions Traveler (December 11) and Trailer (June 13)
In the Question Traveler the Impairment is calculated:
Goodwill 80
Unrecognised non-controlling interest (40%/60% of $80m) 53·3
Total Net assets 2,388·3
Recoverable amount (2,088)
Impairment 300·3
Less notional goodwill on NCI (53·3)
Impairment loss to be allocated 247In the Question Trailer:
Goodwill 120·2
Unrecognised non-controlling interest (20%) 30·05
Total Identifiable net assets Net assets 776·25
Recoverable amount (700)
Goodwill impairment on grossed up amount 76·25
Goodwill impairment on Traveler’s share (80% x 76·25) 61Could you please help me in when do we apply the first method and when the second ?
Thank you.
Hi,
The key difference is that in the Dec’11 question (which I think you’ve called Trailer above, when it is Traveler) the impairment is large enough at 300.3 that it will eliminate the goodwill of the parent (80) and of the NCI (53.3), so there is no need to allocate the impairment to either the parent or NCI, as it will all disappear with any remaining going to PPE as per the question.
In the June’13 exam the impairment isn’t large enough to cover the parent and NCI share of goodwill so it will need to be split according to the percentage ownership.
Essentially both calculations are doing the same but the impairment in one is significantly larger than the impairment in the other that then results in a slightly different ending.
Thanks
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