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Hi, wondering if you could help me out with a simple consolidated goodwill question.
As per the lectures, we start off by taking the cost of consideration less our % share of subsidiaries assets at date of acquisition.
However, going through the ACCA exam past paper answers, they see seems to leave out the ‘our % share’ bit and take into account 100% of the subsidiaries assets.
Taking 100% of the subsidiaries assets seems to be their preferred approach, although they do on occasion take the ‘our % share’.
Wondering if there is a differentiator im missing here?
Any help gratefully received.
Many thanks,
Kevin
gw calculation:
consideration paid (loan notes, exhcnage cash)
add nci share at fv at acquistion
subtract fv of assets at acquisition
= goodwill
less full impairment (donot breakup)
net goodwill.Cheers but am ok with the above apart from ‘add nci share at fv at acquistion’
DEC 10 EXAMPLE
QUESTION
On 1 June 2010, Premier acquired 80% of the equity share capital of Sanford. The consideration consisted of two
elements: a share exchange of three shares in Premier for every fi ve acquired shares in Sanford and the issue of a
$100 6% loan note for every 500 shares acquired in Sanford. The share issue has not yet been recorded by PremierANSWER – THE NET ASSETS OF SUB BIT
Net assets (equity) of Sanford at 30 September 2010 (9,500 )
Less: post-acquisition profi ts (see above) 1,300
Less: fair value adjustment for property 1,200*Why do they not take 80% of the 9,500….the 9500 is the net assets of the Sub as per the sub’s individual bal sheet….The parent only purchased 80% of those net assets?
ACCA past paper exam answers only seem to take the % share in the pilot paper and in one other past exam Dec 08. In the majority they take 100% in the calculation?
Hi,
Im sorry, I didn’t get the whole thing you’re asking. But as for the goodwill, there’re 2 methods of calculating it. Full goodwill method and proportionate method. In premier, NCI is valued at fair value at the date of acquisition, hence full goodwill method. So this is why NCI’s fair value is also not apportioned (taken the %).
Hi,
Thanks for the explanation. It seems the wording in the question is key to choosing the correct method.
Thanks again. Kevin
Hi,
If a question does not state the method of calculating Goodwill what do we do?
assume Full goodwill method OR proportionate method ?
if there is no indication as to what to use, u can use whtever then. examiner is not a person from hell, he ll understand and he does understand. personally i d calculate full goodwill.
and if u r not sure abt anything, write ur assumption, even if u have assumed wrong, u assumed something, and solved accordingly u might get marks for solving the wrong thing correctly.- Topics: 0
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Hi,
I have a question on this past exam paper. (Dec 10),
Could someone please explain working (vi) Non controlling interest, how is the 3,500 calculated?
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