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Years 2005 2004
Intangible assets (note ) 6410 4160
Note: Intangible assets comprise goodwill on acquisition of BI and CJ
(2004 : BI only) . Goodwill has remained unimpaired since acquisition.AH acquired 80 % of ordinary shares of its subsidiary BI several years ago.
1 January 05 Ah acquired 75% of ordinary shares of CJ in exchange for a fresh issue 2 million at 1$ each ( issued at premium of $1 each ) and 2 million in cash .Net asset of CJ at the date of acquisition 5000 (including $50 cash) .
So what’s the accounting treatment of goodwill in consolidated cash flow statement? And please how to prepare T account or statement of goodwill ?
Regards
shoaibIs it correct ?
GOODWILL
Opening balance 4160
acquisition of sub
( 4000 +2000 )shares and cash -(5000@75%) 2250Closing balance 6410
And there is no cash flow so not put in the cash flow statement
Yes, and no!
An exam question would (normally) give you details of the value of the nci’s 25% so goodwill would look at the full value of the subsidiary and compare with the net assets at date of acquisition
No, and that’s a big NO, for your final statement!
Of course there’s a cash flow! There’s $2 million flowing out. However, there’s also 50 being received as a result of the acquisition.
Now, here’s a problem (for me)! I don’t know whether the “50” mentioned in your question is 50, 50,000, or 50,000,000 but whichever it is, that information needs to be used in the group cash flow preparation.
Within “Investing activities” there will be the line “Acquisition of subsidiary” and the cash flow is the NET cash flow that arose when the subsidiary was acquired. In your example that figure is $2,000,000 less this rogue $50, $50,000 or $50,000,000
If it’s $50,000,000 in your case, that leads to the apparently strange situation of “Acquisition of subsidiary $48,000,000 INFLOW”
Ok?
So the investing activities line will read “Investment in subsidiary ($1,950,000)
Ok?
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