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Sir in this Qs , examiner has written following para in his answer
The goodwill of $19·6 million is grossed up by 100/80 to a value of $24·5 million. This extra $4·9 million is known as notional goodwill. The overall impairment is now $30·5 million ($106m + $24·5m – $100m) of which $4 million has already been allocated. Since the remaining impairment of $26·5 million exceeds the value of goodwill, the goodwill is written down to
zero. However, as only $19·6 million goodwill is recognised within the consolidated accounts, the impairment attributable to the notional goodwill is not recognised. Only $19·6 million is deducted in full from the owners of Luploid Co’s share of profits since there is no goodwill attributable to the non-controlling interestI have understood the calculation, but if I ask you that in the exam if we write the first sentence that goodwill of $19·6 million is grossed up by 100/80 to a value of $24·5 million. And after this if we do not write the above which examiner has written and instead write the entire above para in simple and easy words then what can we write instead of the above para?
I hope that I have communicated to you that what I am trying to ask. In simple words, I am trying to ask that after writing the sentence that goodwill of $19·6 million is grossed up by 100/80 to a value of $24·5 million, what I can write in simple words instead of the above examiner answer? Please help me in regards to this
I agree with you.
I would say that, because we are using prop goodwill, it must be grossed up FOR THE PURPOSES OF THE IMPAIRMENT CALCULATION ONLY.
That is enough – then do the calculation and move on.
Finally, don’t forget the easy mark – IMPAIRMENT IS RECOGNISED IN THE P&L AS AN EXPENSE.
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