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Evening Sir,
I’m looking at Chapter 3 and the goodwill specifically of the subsidiary of the subsidiary.
Taking example 1, and M’s investment in T (the sub of the sub), why do we not include a line for NCI along with the Cost figure before moving onto the NA@DOA?
We however consider the NCI when we calculate the goodwill of the subsidiary company from the holding company’s perspective (NCI = 204 in example 1).
Help is much appreciated. Not seeing the logic exactly.
Kind regards,
Yazan
Hi,
In example 1 the goodwill of the sub-subsidiary is calculated using the proportionate share of net assets method, as if we’re not told the FV of the NCI at acquisition then we can’t use the fair value method to measure the goodwill.
In the subsidiary the goodwill is calculated using the fair value method as we’re given the specific fair value of the NCI at acquisition of the subsidiary.
Given the different valuation methods the answer has used different methods to do the calculation. Personally I’d use the same proforma below for any calculation of goodwill and include the NCI based on either the fair value or proportionate share of net assets.
FV consideration X
+ NCI @acq X
– N.A @ acq (X)
Goodwill XHope this helps, let me know if you need me to put the numbers in.
Thanks
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