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In both exams examiner tested impairment test on partial goodwill method.
In Traveler’s question, the impairment loss charged to goodwill and RE is 80% of the gross impairment loss of 76.3, which is 61.
However, in Trailer’s question, the approach is slightly different where we deduct the notional goodwill first, then apportion it between goodwill and PPE.
I’m confused here. Could you explain to me a bit more. Which method to use during the exam? I tried using the method interchangeably but i can’t arrive at the same figure.
Also, I would like to ask about the additional information no. 5 question 1 about the revaluation.
It is a revaluation loss of $12mil initially, and then revaluation gain of $32.59mil.
Why take only $12mil less ($12mil/29years=$0.42mil) to reverse what had been charged to P/L.
This is some sort of like transfer of excess depreciation from reserve to RE right? But i never knew about revaluation loss we also need to do so.
Could you pls explain more about this? I never encountered this before. Thx
re the goodwill, in Traveller, the impairment is calculated following the grossing up by the notional goodwill attributable to the nci
In Trailer the examiner has again grossed up by the notional goodwill attributable to the nci to calculate the total impairment .
Taking that total impairment (remember, the nci has NO goodwill attributable to them) the whole of the goodwill (80) disappears by way of impairment yet there is still a further (247 – 80) $167 to impair and the question clearly states that “There was no impairment of the net assets of Park before this date and any impairment loss has been determined to relate to goodwill and property, plant and equipment.”
Thus, after fully impairing goodwill, the surplus impairment is to be allocated between the parent and the nci
Better?
I get that, but in Trailer, after having the gross impairment loss figure of $300.3mil, the examiner deduct the notional goodwill of $53.3 to arrive at the impairment loss figure of $247mil to be allocated between Goodwill of $80mil and PPE $167mil
However, in Traveler, the notional goodwill of $20.3mil is not deducted from the gross impairment loss of $76.3 in order to arrive at the figure to be allocated to Goodwill, it just taking the parent’s portion of 80% from the gross impairment loss and deduct it from the Goodwill(because Goodwill alone is enough to bear the impairment loss.
Why can’t i use the method in Trailer to be used in Traveler.
If what has been done in Trailer is used in Traveler, i would get a different answer.Notional GW is $20.3mil
Gross impairment loss $76.3mil
Hence the impairment loss to be allocated to GW is $56mil, however, using the method of taking the parent’s portion of 80% would give me 80% × $76.3mil = $61mil.How to know which method is to be used? When the impairment loss is to be allocated to more than one item, which is Goodwill and other assets, we use the method in Trailer and
If the impairment loss is to be allocated only to goodwill, then use the method in Traveler?P/s: could you pls reply to my second post in this topic, i think you might have overlooked. Thx.
Look at Trailer answer again (working W3) and follow this post:-
Do you see that the total impairment is 300.3
If we were to take 60% / 40% of that total impairment, that would result in values of 180.18 and 120.12
But that includes the impairment of the goodwill and goodwill is attributable only to Caller.
So deduct the 53.3 from the nci allocation of the impairment (120.12 – 53.3) and that leaves 66.82 impairment to be allocated to the nci
and that’s the same as the printed solution!
In the case of Traveller, the impairment is allocated on a percentage basis but the working is not the same because, in Traveller, the total goodwill exceeds the impairment whereas, in Trailer, the impairment bit also into the PPE
Is that better?
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