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Can anyone help with impairment loss calculation, particularly goodwill working? Thanks a lot!!
Hi Lizzie, it’s q45 Andash from BPP 2011 practice & revision kit, working 7 in answers. Would be very grateful if you could explain it!
It will better if you type in the part of the Qs involved and the related answer you are confused about as not every one use the same kit. I use Kaplan for instance so have no idea what you are referring to
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my Andash question is currently based on the Past Year Question that had been set,
Andash owns 60% of a subsidiary Broiler. The goodwill arising on acquisition was 90m. The carrying value of Broiler’s identifiable net asset (ex goodwill from Business combination) in the console financial statements is 240m at the end of reporting date. The recoverable amount of Broiler is expected to be $ 260m and no impairment loss has been recorded.
Because the goodwill from biz comb is only representing 60%, we have to gross it up to 100% for comparison of RA and CV (both in 100%)
working:
CV of identifiable net asset 240
Notional G.w (90×100/60) 150CV of CGU 390
RA of CGU (260)Full impairment loss of the yr 130
However, the parent measured its sub g.w partially, so the impairment loss of goodwill have to represent the holding percentage , ie 130 x 60% = 78
In the console statement of cash flow, in order to reconcile the profit before tax to operating profit, the impairment loss have to be added to the profit.
Since my lecturer didn’t discuss this question with me, so pls not hesitate to tell me where i get it wrong for me to correct my understanding on IAS 36 for the sake of this coming exam. Thx
Hi,
Don’t really understand what you need help on as u did not specify, but if i can guess, in goodwill calc, why its grossed up?
REason being that, i presume the co calc goodwill using proportionate method. So to calc impairmt when initial gw is calc using proportionate method, u always need to gross it up. remember proportionate method GW only relates to parent GW. but here we need to calc impt for the whole sub( parent & NCI) hence the notional GW calc by grossing up, hence the value of 150 for GW and total imprt of 130 relates to the entire sub so we take our share of the impt which is 60%. Hope it makes sense.
Let me know if this however is not where u need clarification on by clarifying what your concerns aregd luck
Dear all , this post maybe old but its still applicable till now.i hope if theres still anyone here to help. Could i check with you on this , we gross up the goodwill to include the NCI’s , but when we compare with RA to find out impairment , if RA is already 60% , why do we still need to gross up ? Isnt it comparing 60% to 60% is more appropriate? I understand the concept of grossing up , its just the RA part because it is proportionated to parents share (which is * with 60%). I hope i have brought out my confusion clear here ?
And also anyone could help with the goodwill balance in SOFP ? Theres an closing bal of 130 in yeae 2005 and 120 in year 2006. Any workings for the cashflows ?
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