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Hi,
I’m struggling with the journal entries of Impairment of Goodwill for Partial and Full Valuation of Goodwill.
For Full Valuation of Goodwill the journal entry is
CR goodwill 2
DR GRE (60% of 2) 1.2
DR NCI (40% of 2) 0.8But how is the journal entry made for the P&L statement? Because in the P&L statement for Full Goodwill we put the impairment in S’s column. But the journal entry above doesn’t mention the P&L statement?
Doesn’t matter about the columns too much, as you won’t be asked to prepare full financial statements. If you were using columns, and it’s full goodwill, I would show the full amount (100%) of the impairment in S’s column.
But you are more likely to be asked to calculate just one or two figures (e.g. goodwill, impairment, and profits/ TCI attributable to NCI.
Hi Stephen,
Many thanks for your response.
I’m still not understanding completely.
I understand that with Impairment of Full Goodwill, that Group Retained Earnings and NCI are both deducted their share of the goodwill impairment. But the thing that confuses me is how this makes it way to the P&L statement since the journal entries are as follows;
CR goodwill 2
DR GRE (60% of 2) 1.2
DR NCI (40% of 2) 0.8Why this is confusing to me is because with the impairment of partial goodwill (after grossing up etc) the journal entries are;
CR Goodwill
CR Net Assets
DR P&LHere the debit goes to P&L, but with full goodwill the debits go to GRE and NCI.
Why are these journal enties different between Full and Partial goodwill? And with Full Goodwill, how does the impairment makes its way to the P&L statement with journal entries?
Any help would be much appreciated.
SFP
Full goodwillDr GRE x
Dr NCI x
Cr Goodwill x
Cr Net Assets x (if impairment exceeds net assets)Partial goodwill
Dr GRE x
Cr Goodwill x
Cr Net Assets x (if impairment exceeds net assets)P&L
In both cases the full amount of impairment is recognised in operating expenses in P&L. If full goodwill, you would have to adjust NCI %PAT / TCI for impairment.REASON
Full goodwill is measured on whole business, including the NCI share.FINAL COMMENT
In the real exam remember that journals are not explanations – so go easy on them!
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