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Hi Mr Mike, I have a question relating to negative goodwill(bargain purchase)
I have got negative goodwill, the procedures will be in the following way, is not it?
Debit current liabilities
credit GRE
credit Nci(if Nci is measured by fv method)Afterwards, ?f i have negative goodwill and if i credit it then double negative will give me debit side which i will remove goodwill under non-current asset and will add it over total assets.
Then i will gonna make adjustment equity and liabilities part as below
Debit current liabilities
credit GRE
credit Nci(if Nci is measured by fv method)Am i right?
Where negative goodwill arises, the nci will have none of that bargain purchase allocated to them so, no, you are not correct
In working W2 Goodwill calculation, arrive at the bottom figure and, if it’s a negative, just check again that you have not made some silly mistake (the last time that I remember negative goodwill arising in an examination question, the examiner actually stated within the question that the acquirer regarded the acquisition as a bargain purchase!)
So, we have arrived at this negative amount at the bottom of working W2
Although I shouldn’t call it this, can you see that this is the parent acquiring fair valued net assets (say $500,000) for an amount (including the value of the nci as at date of acquisition) of, say, $450,000
If you spend $450 and acquire an asset with a fair value of $500, would you accept that that is the equivalent of making a profit?
And what happens to profits in the context of an incorporated entity?
They are gathered together in the statement of profit or loss
And that’s where the double entry goes – to the statement of profit or loss – at the first available opportunity ie at the year end date into the year’s financial statements
OK?
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