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Goodwill Impairment Proportionate Method – Why only reduce 80% from goodwill?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Goodwill Impairment Proportionate Method – Why only reduce 80% from goodwill?

  • This topic has 1 reply, 1 voice, and was last updated 8 hours ago by starlitcircuit.
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  • May 16, 2025 at 11:35 pm #717298
    starlitcircuit
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    • Topics: 4
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    In a consolidation question, NCI was measured using the proportionate share of net assets method. The goodwill impairment in the (note) was $150,000, but in the goodwill working, they only reduced goodwill by $120,000 (i.e. 150,000 × 80%).

    However, I thought under the proportionate method, the entire goodwill belongs to the parent, so the parent should bear the full impairment. So shouldn’t the full $150,000 be deducted from goodwill?

    Why is only 80% deducted from goodwill when the parent owns 100% of it under this method? Is this just a working presentation issue, or is there a deeper reasoning?

    May 16, 2025 at 11:37 pm #717299
    starlitcircuit
    Participant
    • Topics: 4
    • Replies: 1
    • ☆

    Also, in terms of the journal entry, isn’t it supposed to be:

    DR Group retained earnings 150,000
    CR Goodwill 150,000

    Since the group owns all the goodwill in this method, shouldn’t the group record the full impairment in both the working and the journal entry?

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