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Hi,
i have a question regarding impairment testing of Sub. could you please clarify what figure need to be used to compare the recoverable amount of sub with the sum of goodwill + net asset or asset itself.
As per the note, net asset figure is need to be used. However in Dec 2012 past exam question, the total assets amount was used.
Thank you!
In my understanding it should be total assets including goodwill.
Am I not correct that the question in which goodwill was not included actually specified that the comparison should be made against the net assets as shown without goodwill?
Hi Mike,
Let me rephrase my question. As I understand in order to identify the impairment figure we need to compare recoverable amount with the sum of goodwill+net asset.
What confused me is that why in 1Q, December 2012 recoverable amount was compared with goodwill+asset?
Thank you!
Again, my comment is the same (well, slightly varied!)
There is a question from past exams (and I’ve a sneaky feeling that this is the one) that specifically identifies that recoverable amount should be compared with “assets” without and recognition of liabilities
Please, sorry to mess you around, but can you just check whether the December 2012 question says something like that
Let me know if it doesn’t
Thank you, Mike!
Sorry, but here is another silly question on impairment with partial NCI.
Could you please advise how the total impairment figure have to be apportioned between parent and NCI?In past exam questions I found 2 different approaches (but there are different group structures in it ):
1. Impairment for NCI is unrecognized NCI % of goodwill (notional goodwill on NCI) – June, 2013 – vertical gruop
2. Impairment for NCI is NCI% of impairment figure – Dec, 2011 – tentthank you!
Gross up the nci by their appropriate percentage as applied to parent goodwill
If parent has 75% and goodwill is 30,000 (nci is on a proportional basis), the nci notional goodwill is 25/75 x 30,000 = 10,000
30,000 + 10,000 + all other net assts of subsidiary then compared with recoverable amount.
If recoverable amount is > above goodwill + net assets, there’s no impairment
If recoverable amount is, say, 12,000 LESS than goodwill + net assets, then we need to impair by 12,000 coming out of the goodwill.
Goodwill is split 30,000 and 10,000 (notional)
Impairment is 9,000 and 3,000 (notional)So impair parent’s goodwill by 9,000 but don’t touch the 3,000 notional goodwill attributable to the nci
Ok?
Ok, clear.
But as per June, 2013 approach, we deduct from impairment amount of 12 000 the NCI notional goodwill of 10 000.
Is there any reason for that?
Not according to my version of the printed solution! Are you sure that you have the correct reference? June 2013 is Trailer, Caller and Park
yes, the amount of 53.3 in impairment of goodwill in Park.
It was deducted from impairment amount of 300.3….
And then we have the balance of 247, which should be allocated between parent and NCI
Ah – the impairment was calculated and notional goodwill was taken into account to calculate that total impairment. But we can’t charge the nci with any of the goodwill impairment because they don’t have any goodwill.
So, having calculated total impairment 153.3 relates to goodwill but, of that, only 80 is deducted and it’s all deducted from the parent (the other 53.3 is deducted in order to find out how much of the impairment relates to the PPE
Is that clear (it’s clear to me!)
how did you come to 153.3?
And is it because of full goodwill is impaired and we have additionally PPE impairment?
Otherwise if no PPE impairment would be involved we had to just allocate this 300.3 on the proportion of 60%/40%?
If goodwill of the parent is 80 and that relates to 60% then notional goodwill of the nci 40% must be 53.3 and that gives 133.3
Oops, sorry! I replied without having the question in front of me, was doing it from memory, and without a calculator. Apologies!
Otherwise, is it clear now?
yes, it is! thank you very much!
and the very last question regarding impairment ))
in full goodwill approach:
why in W3 – parent RE calculation, you are deducting impairment attributable to parent from parent RE and then in w4 – NCi calculation – impairment attributable to NCI from NCI
whereas you can save your time by deducting full impairment from Sub RE in w3 and then apportion it to parent and NCI?
is there any trick?
Never thought about doing it that way!
I suppose it’s because I’m so used to calculating amounts by following the mantra “H’s own + H’s share of S ………”
the result should be the same…
however in essence it is not right, as impairment should not affect on Sub RE
it affects on P’s share in sub and NCI
I will stick to your approach!
Thank you very much!
Just a new thought come to my mind that the above stated is valid in case we have goodwill impairment only.
If we have PPE impairment for instance (in addition to goodwill, as it was in the past exam we talked about) PPE impairment should relate to Sub RE, right?
Anyway, just to be on the safe side, i will use your approach and will not think about impairment any more……
Three posts ago you said “… and the very last question regarding impairment”
I’ve a good mind to report you to the ACCA for lying!
If we are having to compute notional goodwill in order to determine the extent of the impairment attributable to the parent, then ignore the notional goodwill, working W4 nci will not be affected by that impairment.
If the impairment is other than goodwill, the nci will be affected in working W4
Ok?
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