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Hello,
Regarding P2 Q1 Traveler Dec11The answer to the impairment of partial goodwill of Captive is 76.25
I understand that 80% of the impairment must be recognised, however doesn’t the 20% need to be allocated too? To NCI?
Many thanks
No. Impartial Goodwill (G/W) means G/W only to parent, no G/W to NCI. Since impairment relate only to G/W, no impairment charged for NCI.
Hey Guys, please allow me to continue this thread cos I happen to think of the same question – Split of Goodwill impairment btw parent and NCI.
P2 examiner wrote an article called biz combinations published in April 2009. His way allocated goodwill impairment to NCI. But I remembered there is no goodwill impairment attributable to NCI.
Please clarify me, thanks.
Qin
Of nci is proportionate, then they have no goodwill and cannot therefore be charged with any impairment.
For the purposes of calculating impairment, it is necessary to “gross up” goodwill by the value that could have been attributed to the nci if they had been on a full fair value method. Then we can see how much the impairment should have been if nci had been allocated any. Once we know the theoretical impairment, we can now split it in proportion of shareholdings, but only the parent’s share is actually deducted (because the nci doesn’t have any!)
Ok?
Hello Mike,
Thanks, understoodHowever I’ve got a query with June 13 Trailer.
Park was impaired which resulted in $300.30 impairment loss.
I have allocated P’s share i.e 60% x 300.3 = 180.20 and split this btw GW and PPE as 80 and 100.2 respectively. Also chgd to R.E 180.2 correctly as per answer
My question is why has the notional gw been deducted from the impairment for allocation purposes
Many thanks for your help
It’s an interesting question. To determine the impairment, we need to include the notional goodwill that would have been attributable to the nci if we had valued them on a full, fair value basis.
Having calculated the goodwill impairment, we cannot charge the nci with any because they don’t have any goodwill to impair. So we deduct the nci notional goodwill from the impairment
Is that ok?
Hello, I would like to continue on this thread though it’s a bit old and I hope you can help.
Both questions of Trailer and Traveller had acquired Park and Captive respectively. The scenarios look similar due to the fact of partial good will is used.
However, the allocation of impairment is different.In Park, the impairment of 300 was allocated firstly to the notional good will 133. Then the remaining was allocated to other assets of which 167×60% to Parent reserves and 167×40% to NCI
In Captive, the impairment of 76.3 was allocated to the partial good will 76.3 x 80% of which was also deducted in reserves of parent. No NCI impairment here.
Why in one question we charged impairment to NCI but with the other we ignored?
I realise in Park the impairment was great than goodwill, unlike Captive.Hi,
There is an illustration within the class notes that covers the allocation of an impairment when goodwill is measured using the partial goodwill method. Please have a look at it and it will hopefully clear up your issue.
If it doesn’t then let me know.
Thanks
Hi in class notes I don’t understand the allocation to net assets. why it is 5
if we take percentage of 40 it turn out 32 (80%)
we allocate 28 to Goodwill and remaining 4 should go to Net Asset.then why 5?
I see your logic, but, unfortunately, it’s not the way it’s done.
This is how I teach it:
Total impairment is 40
Allocated to grossed up goodwill = 35
Allocated to net assets = 5 (balance)I know this one is maddening and counter-intuitive!
what will be in following case then
For example, let’s say that a parent has 80% in a subsidiary and you measure NCI by the partial method.
The carrying amount of goodwill is CU 100 and the carrying amount of other CGU’s assets is CU 1 300. The recoverable amount is CU 1 400.
The impairment loss calculation is:
Carrying amount of goodwill grossed-up to 100%: CU 100/80%*100% = CU 125
Add carrying amount of other assets: CU 1 300 (no need to gross-up as they are stated at 100%),
Less recoverable amount of CGU: – 1 400
Impairment loss: CU 25
As it’s 100% and it fully relates to the goodwill, you need to recognize only 80% of it, that is CU 20.so in this case whole 25 can be allocated to grossed up goodwill of 100 and in actual we charge only 20 to goodwill right?
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