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Hi Sir,
Do we always have to subtract impairment in order to arrive at the final goodwill figure or only if it’s related to the parent’s products?
The Dec 12 past exam paper added the impairment to admin expenses as it was because the subsidiary’s products had not been profitable.
Am I to assume that if it was parent’s impairment, it would be deducted from the consolidated goodwill calculation in order to get the final goodwill figure?
Thanks
Lorraine
Goodwill never relates to the goodwill of the parent’s products. It really has nothing at all to do with product profitability except that lack of profitability could (probably does) indicate falling fortunes for the subsidiary.
It’s set off against profits (either through cost of sales or shown separately, dependent upon the instructions in the question) in the same way that depreciation is. It’s just another way of reducing the value of a non-current asset
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