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How do we calculate the goodwill at acquisition if the FV of NCI is to be measured at FV of Net Assets acquired?
just like the one in June 2008 Q1(a).
In the suggested answer, there’s no calculation of NCI, and the total net assets is apportioned to 75%.
All in ($’000)
Consideration transferred:
Shares – $69000
Deferred payment – $36000
NCI – ??Fair value of net assets acquired:
Equity shares – $24000
RE B/f – $69000
Re current yr – $13500 x 4/12 = $4500
Fair value adjustment – $6500
Total Net Assets – $104000.So how do we calculate and how much is the goodwill at acquisition if NCI is valued using fair value of net assets acquired?
and is there’s any difference to calculate the profit attributable to NCI where there’s Impairment loss on goodwill in current year if the NCI is valued at FV or FV of Net assets acquired?
In suggested answer, the examiners did not deduct $2000 goodwill impairment from the the NCI in arriving to profit attributable to NCI. is it because of the NCI is valued at FV of net assets acquired?
FV of net assets is another way of saying “valued on a proportionate basis”
From the figures you have quoted, the nci value at date of acquisition is 25% x $104,000
If you apply our %age to $104,000 our share of those assets is $78,000. Cost, again from your quoted figures, is $105,000 giving 27,000 goodwill
And in answer to your second post, if nci is valued on a proportionate basis, then there is no goodwill attributable to them so we cannot charge them with any of the impairment
so there’s 2 ways of calculating, either by calculating the NCI value 25% x $104000 or as %age of $104000. Both methods giving the same answer.
and
what do u mean by “there is no goodwill attributable to them” when NCI is valued at FV of Net assets?
It’s their proportionate share of the fair valued net assets
Yes, you could include 26,000 as the value of the nci or you could compare the cost of acquisition with our 75% of the fair valued net assets
Ok?
we didnt charge the impairment to the NCI in arriving at the profit attributable to NCI, but we charge the impairment as administrative expenses in the consolidated P/L?
But if the nci is proportionate, we CAN’T charge them with their share – if they don’t have any goodwill, we can’t impair the goodwill that they don’t have
the question stated that there’s a goodwill impairment of $2000.
so since NCI is valued at fair value of net assets, we cannot allocate the impaired goodwill to the share of the NCI, but can we charge them as admin expenses in consolidated income statement?
Yes, of course we can! What makes you think that we shouldn’t do that? the Statement of Income is the income achieved under out control. The only reason the nci is involved is because of their share of the subsidiary’s profits. And the goodwill impairment is not set against the subsidiary’s results
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