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Hi Sir Chris!
Just a quick question. In Full Goodwill method, do we also have to compare the impairment amount and goodwill amount to decide whether or not the goodwill could be reduced to zero?
Does it also mean that if goodwill is higher than the impairment amount (in full goodwill), we’ll just calculate impairment loss on P’s share using its effective interest (for complex groups)?
Thanks and hope to hear from you soon!
Best regards,
KylerHi Kyler
Can you be a bit clearer with your question please as I genuinely cannot understand what it is that you are asking. If you clear it up I’ll deal with it.
All I can say at the moment is that the goodwill is impaired down to zero before being allocated to other assets on a pro-rata basis.
Thanks
Hi Sir Chris!
What I mean is that on the exam in Q1, if it is a full goodwill method and there is an impairment test, and assuming we have already calculated the impaired and goodwill amount, do we compare the impaired amount and goodwill amount to decide whether or not the goodwill is reduced to zero?
In connection to the above, assuming that the Q1 is a complex group (vertical or D-shaped) what rates should we use to allocate the impairment amount to NCI and Group RE?
There is an instance (in partial goodwill method) when the goodwill is not reduced to zero (if goodwill is greater than the impaired amount) and impairment allocated to NCI is only based on the parent’s interest holding. Again, assuming that this is a complex group, does it mean to allocate impairment amount based on the effective rates?
Sorry for the confusion.
Best regards,
KylerHi,
If the impairment is greater than the amount of goodwill in the accounts then we have to impair any remaining assets on a pro-rata basis. So once the impairment is calculated charge it against goodwill first.
We split the impairment across the NCI and Group RE based on the effective ownership percentages.
Hope this helps.
Thanks
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