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Goodwill calculation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Goodwill calculation

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by Stephen Widberg.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • November 5, 2020 at 5:17 am #594095
    alankang
    Participant
    • Topics: 8
    • Replies: 11
    • ☆

    Hi Sir,

    Hope you’re well there.

    When we do goodwill calculation, it is “FV of consideration transferred + FV of NCI + FV of previously interest held – FV of NA”.

    Assuming, the NA of subsidiary is negative figure and come to goodwill calculation, should we add or minus the negative figure from NA of subsidiary?

    For example,

    Share capital = $1,000
    Pre-acquisition = ($7,000)
    FV of consideration transferred = $900
    FV of NCI = $100
    Full goodwill method is using

    If based on my solution, my goodwill calculation will be $900 + $100 – ($1,000 – $7,000). Hence, my goodwill acquisition will be $7,000 and this $7,000 will be categorized under Goodwill in SoFP.

    Will it be possible that my solution is wrong as my mind tell me that it maybe a bargain purchase and $5,000 ($1,000 – $6,000) should immediately charged to SoPL.

    Can you please me to clear my mind about this calculation?

    Thank you.

    Regards,
    Alan

    November 7, 2020 at 8:06 am #594328
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3408
    • ☆☆☆☆☆

    I can’t see the logic of your question – you would not pay money for something where the FV of the NA is negative. I would assume that the NA have been incorrectly valued!

    But goodwill would be 900 + 100 + 6000 = 7000.

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