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Notional Goodwill

Forums › ACCA Forums › ACCA SBR Strategic Business Reporting Forums › Notional Goodwill

  • This topic has 3 replies, 4 voices, and was last updated 7 years ago by jordan224.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
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  • November 17, 2015 at 12:11 pm #283303
    Abdul Rafay
    Member
    • Topics: 29
    • Replies: 44
    • ☆☆

    Sir, when do we need to calculate notional goodwill?

    I know if we have measured NCI at it’s proportionate share of subsidiary’s net assets and we simply have goodwill impairment, then Dr Parents Retained Earnings (and Cr Goodwill) with the full amount of impairment but when do we need to calculate Notional Goodwill??

    November 20, 2015 at 5:34 pm #284204
    neilsolaris
    Member
    • Topics: 59
    • Replies: 415
    • ☆☆☆

    I’m not sir (not for the purposes of open tuition anyway!) but I’ll have a go at answering.

    We need to compare the subsidiary value with the recoverable amount to begin with, to determine if and how much impairment there is. So we have to gross up the NCI with their notional goodwill, for comparison purposes.

    November 30, 2015 at 6:19 pm #286510
    sarita82
    Member
    • Topics: 11
    • Replies: 23
    • ☆

    I have the same question but I couldn’t see the answer

    December 2, 2015 at 4:40 pm #287019
    jordan224
    Member
    • Topics: 1
    • Replies: 4
    • ☆

    if im not mistaken, notional goodwill came once right in past year question between 2012-2015 (i forgot exactly which one), but i remember that we calculate that if the entity use partial goodwill method, and the impairment reach not only goodwill, but other asset.

    so it is like, if my goodwill (partial) is 100 and my share in subsidiary is 80%, then to calculate impairment, I grossed up my goodwill first, 100x(100%/80%) = 125. Then I add it to fair value of net asset at date of reporting, compare it with recoverable amount. Assume the impairment loss is 200.

    To find out the allocation of impairment loss in the asset, that’s when we deduct notional goodwill of NCI, which is the grossed up amount before, 125-100=25. After that, 200-25 = 175. This 175 is allocated to parent goodwill, reduce it fully to 0 (100-100), then the rest of 75 is allocated to (let’s say) PPE. And for this PPE, we separate further 80%x75=60 to parent and 20%x75=15 to NCI.

    So, in CSOFP later
    Goodwill: 100-100
    PPE: xxx-75
    Retained earning: yyy-100-60
    NCI: zzz-15

    I might be wrong, please check and correct me

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