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December 15, 2019 at 8:06 pm
Ref: Illustration – Subsidiary Impairment (partial goodwill)
The adjustments read: Dr Group profit or loss 33 Cr Goodwill 28 Cr S’s net assets 5
Should the second Cr read; Cr P’s Net Assets 5??
April 29, 2019 at 6:50 pm
can you explain to me how the NCI got $7m of the impairment in the illustration of subsidiary impairment (partial goodwill)
May 2, 2019 at 6:08 pm
It was 20/80 x 28 million, which was the NCI portion of goodwill. Hope it helps.
January 1, 2019 at 11:12 am
Hi sir. I have read the F7 article on impairment of goodwill by ACCA (https://www.accaglobal.com/my/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/impairment-goodwill.html). It says the following regarding impairment of goodwill where the proportionate share method is used:
“When goodwill has been calculated on a proportionate basis then for the purposes of conducting the impairment review it is necessary to gross up goodwill so that in the impairment review goodwill will include an unrecognised ‘notional goodwill’ attributable to the NCI. Any impairment loss that arises is first allocated against the total of recognised and unrecognised goodwill in the normal proportions that the parent and NCI share profits and losses. Any amounts written off against the notional goodwill will not affect the consolidated financial statements and NCI. Any amounts written off against the recognised goodwill will be attributable to the parent only, without affecting the NCI. If the total amount of impairment loss exceeds the amount allocated against recognised and notional goodwill, the excess will be allocated against the other assets on a pro rata basis. This further loss will be shared between the parent and the NCI in the normal proportion that they share profits and losses.”
I don’t think this has been covered in your lectures. I only remember you said in one of the first few lectures (consolidation) that, in W5 (group RE working), we attribute the entire amount of impairment to the parent if we’re using the proportionate share method because the goodwill is only attributable to the parent. In reality, impairment takes into account the grossed up amount of the parent’s goodwill, so it is also attributable to the NCI and therefore we only take the parent’s share of the impairment to write off against the goodwill, instead of the entire impairment.
May I have a clarification? And may I know why this is not covered in your lectures?
July 28, 2018 at 8:00 am
Sir, I think notes on “Impairments and Group accounts” needs to be corrected, as it states that “An asset/CGU is impaired if its carrying amount FALLS BELOW its recoverable amount.” instead it must have states “impaired if its recoverable amount falls below carrying amount” as you shown in example.
November 20, 2018 at 2:57 pm
November 28, 2018 at 12:25 pm
Glad to see this here, as I was thinking exactly the same thing.
July 16, 2018 at 9:52 pm
sir, if carrying value(40)is more than its recoverable value(38), then how come the subsidiary is impaired
July 17, 2018 at 12:51 am
Malihapk, impairment occurs when the net carrying value of an asset is higher than its recoverable amount.
Recoverable amount is the higher of : Value in use (future discounted cash flows) and Fair value less costs to sale. We take the higher of the VIU and FVLCS so that we don’t overstatement the impairment value.
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