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I’m not quite there with my understanding of how to treat the impairment of Goodwill.
With the Full/Fair Value method of charging goodwill (assuming parent is 80% and subsidiary is 20%)
In the SOFP:
80% of the goodwill impairment reduces the Parent’s retained earnings
20% of the goodwill impairment reduces the NCI’s retained earnings1) Then why is it the case, that in the SPLOCI we do not charge the impairment 80% to the Parent’s P&L and 20% to the Subsidiaries P&L? (and instead charge 20% to the Subsidiary’s P&L only?) What about the Parent’s 80% in the SPLOCI?
2) We charged it to their retained earnings in SOFP though do not need to in the SPLOCI?
With the partial method, we do not charge anything to the NCI’s retained earnings, and charge it all to the Parent’s RE (as the partial method only includes the Parent’s share of goodwill, thus it can only include the Parent’s share of impairment losses). Thus it makes sense to me that we do the same to the Parent’s P&L.
Full goodwill in the P&L:
100% of impairment charged on the face of the P&L
But:
P&L is then split up – attributable to NCI and attributable to the group
As 20% of impairment is deducted in calculating NCI share, this means that only 80% is effectively charged to group
Don’t forget the consolidation is a spreadsheet exercise and the entries have no impact on the individual accounts of the parent or subsidiary.
I think I’ve gotten mixed up.
Re-watching some of the lectures, going back to FR level – I see actually the whole goodwill impairment charge (of £20k) is allocated to the Subsidiary’s column in the SPL Consolidation workings (8:20 onwards – https://opentuition.com/acca/fr/group-spl-example-mya-acca-financial-reporting-fr/).
Not just the NCI portion (of 20%), the whole amount.
At the end of the computation, when the NCI’s portion of the profits is calculated, the impact of the 100% goodwill impairment charged to the subsidiary will be split between the NCI and the Group, as the group will get it’s 80% of the impairment in the form of reduced profits from the subsidiary, whilst the NCI will keep it’s 20% in it’s share of the subsidiary profits.
I think previously, I was expecting the split of the goodwill impairment to occur in the top part of the computation i.e instead of 100% going to S’s column, S should only get 20% whilst the P column gets 80%.
I feel like I’m 90% there
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