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Hi Werty,
I am quite confuse doing 2 questions with 2 different type of answers and I am sure you can help me.
June 2009 Question for Pacemaker, Syclop and Vardine.
In the answer sheet provided on the ACCA website, Vardine according to my calculation will have a goodwill of:
Cost of investment – (Shares + RE ) * 30%
120m – (100m + 160m) * 30%
= 42m goodwill
This 42m goodwill is nowhere can be seen in the answer sheet. As if that goodwill calculation is not necessary to be done.Where in the REVISION KIT for HORSEFIELD, SANDFLY and ANTHILL
There is a calculation of Goodwill for Anthill, here 120 and I can see that 120 is included in the SOFP under the title of INVESTMENT IN ASSOCIATE.My question is…. Why on 1 question the associate goodwill is not accounted for and on the other question it is accounted for? Isn´t it a bit not consistent?
Thank you.
Ratna
Ratna, according to my knowledge, we do not calculate any goodwill for associate. we just put the investment in associate figure in the balance sheet. that is it. this is what i think so. dont know if i am right or wrong.
Hi Salman,
Yes, we do calculate the goodwill for associate. Look at your Kaplan Text Book for Test Your Understanding 1 Chapter 4. The investment in associate in SOFP include goodwill.
Ratna
Hi! There are two ways of arriving at the SoFP “Investment in Associate”
Method 1 is “Share of Associate’s net assets at year end + premium on acquisition” Method 2 is “Cost of investment in Associate + share of post-acquisition retained – “goodwill” impaired since acquisition”
Either method should arrive at the same figure. I personally think that method 1 is quicker and easier.
HOWEVER! There is a situation which you will face at P2 level where method 1 does not work. In addition, Ratna is correct in saying that the premium paid to acquire the Associate company shares should no longer be called goodwill! This premium is calculated in exactly the same way as if it were a subsidiary, but it’s a premium, not goodwill.
Does that help?
Sorry Ratna, I got confused with who had written which post. Of course, you are correct and ( in my view ) so is Kaplan. But it shouldn’t be called “goodwill”
Hi, I want to ask what will answer be for goodwill for Pacemaker? Why they dont include NCI at acquisition in answer sheet?
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