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Hi Mike,
If we have 80% of subsidiary and we sell 20% to get to 60%, do we still need to include goodwill in the working for “adjustment to parent’s equity”? I see that in bpp’s example on disposal they only show this if;
a) we sell all of subsidiary
b) we cross the 50% ownership barrier down from 50 %In their example of going from 80% to 60% they do the following;
F.V of consideration received = X
less: increase in NCI in net assets at disposal (20%x (shares+ret earns)Are there two different methods for reaching the same answer ? What is the difference between these methods?
Thank you in anticipation.
Was the nci valued on a proportionate basis? If so, they didn’t have any share of goodwill before the sale and they don’t become entitled to any goodwill when the 20% disposal takes place
Does that answer it?
So basically if NCI is valued on a proportionate basis then we don’t have to include goodwill in the working for “adjustment to parent’s equity”and if NCI is valued on a fair value basis then we will include goodwill in the working for “adjustment to parent’s equity”. Am i right ?
I guess i just wrote the opposite. It should have been if NCI is valued on a proportionate basis then we have to include goodwill in the working for “adjustment to parent’s equity”and if NCI is valued on a fair value basis then we will not include goodwill in the working for “adjustment to parent’s equity”.
Confused 🙁
I guess i just answer that correctly this time.
Er, no. Your first post was correct! If they are valued on a proportionate basis at the date of our initial investment, then they have no goodwill and, when we sell an extra 20% back to the nci, then they don’t suddenly become entitled to any goodwill.
Therefore in the calculation of the value of the net assets to be transferred to the nci, goodwill is not in that calculation
If they were valued on a full, fair value basis, then on the disposal of the 20%, we do need to include the appropriate proportion of goodwill in the calculation of the value of the assets transferred
Ok?
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