SBRImpairment of goodwill

Hi, I would like to share my understanding with you regarding this scenario. But first you need to know what is the group policy in measuring NCI. (At fair value or proportion of sub's net assets? 1) My understanding of adjustment Since goodwill is a group entry, any impairment upto the goodwill amount will be adjusted to the group profit. Adjustments above this amount will impact the "investments" of the parent's stand alone financials, if I am not mistaken. ==================> WHAT I THINK: Yes, partly correct. If the group's policy is to value NCI at propotion of Sub's net asset, then ALL the goodwill as well as ALL G/W impairment is attributable to PARENT ONLY. In this case, in the Retain Earnings of parent will be decreased dy the amount of impairment loss. However, if NCI is measure at Fair value, it means Good Will is in full (100%), and any impairment loss will be shared between Parent and NCI with their holdings. NOT all impairment is to parent company. ______________________________________________ 2)My problem is, what will be the carrying value of investment to be compared with NRV? ================> WHAT I THINK: In order to calculate the impairment loss, you will need to compare the CARRYING VALUE of the sub with its RECOVERABLE AMOUNT (which is higher of: Fair value less cost to sell, and Value in use) The carrying value of investment to be compared with its recoverable amount (which you refer to NRV) is: Subsidiary's Net asset at year end + Good will I hope this helps. Please let me know if you need to discuss further :) Regards, Ruby

Hi Ruby, As pointed out (which I failed to address) the policy states goodwill is measured at FV so I am in agreement with your clarifications. Thanks Ajmal

Yep, if NCI at FV then impairment loss is shared between Parent and NCI. I'm planing to take P2 in June, hope we can help each other out :)

Yeah sure :) all the best with P2! that and P4 are the best papers in ACCA

wow!!excellent way to share our knowledge and coming up with our own problems....planning to sit for p2 this june,will be in touch with u guys.thnx a lot and very best wishes.

Hi all I have an issue with an exercise belown. I have problems understanding impairment of goodwill. Can you break it down for me slowly so that I can get it! Thanks :) Financial position 31 Dec 2007 for H group co: H ltd S ltd T ltd 45,000 shares in S 65,000 30,000 shares in T 55,000 Sundry Assets 280,000 133,000 100,000 Total 345,000 188,000 100,000 Equity Share Cap 100,000 60,000 50,000 Retained Earnings 45,000 28,000 25,000 Liabilities 200,000 100,000 25,000 Total 345,000 188,000 100,000 The inter-company shareholdings were acquired on 1 jan 2001 when retained earnings of S were 10,000 and those of T were 8,000. At that date, the fair value of NCI in S was 20,000. The fair value of the total NCI(direct and indirect) in T was 50,000. 1. Prepare Fin Pos, assuming goodwill has been fully impaired. Please try and explain this goodwill ipmairment if anyone can.

Sorry guys. I didnt read the instructions. I solved it and it was quite easy. I dont know why I got confused. Ignore!!!!