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Please may I get an explanation on why we need to calculate notional good will for impairment loss calculations when consolidation statement of comprehensive income.
To work out how much of the impairment should be recognised when the nci is valued on a proportionate basis. So calculate the total impairment, calculate the nci notional goodwill and add to the actual goodwill. Compute how much of the notional impairment should be allocated to us / nci
Then record our share as the impairment
Thanks Tutor, how is notional good will calculated? do i have to calculated notional goodwill to get the figure for impairment loss whenever a question suggests a subsidiary is impaired( carrying value is higher than recoverable amount.
see question 16 of BPP text on P2 (HIGHLAND)…adjusment G
The examiner seems to do it on a proportional basis. That is, if we have 80% holding and goodwill has been calculated as $100, then the notional goodwill attributable to the nci must be their 20% as compared with our 80%. Thus the nci notional goodwill must be a quarter of ours = $25
OK?
Hello Tutor, please how is the impairment loss treated if the loss is greater than the carrying value of the goodwill.
Hi,
If the loss is greater than the value of goodwill any remaining impairment will go to the remaining assets on a pro-rata basis.
Thanks
Hi Tutor
When we calculate goodwill, we will do as below:
Goodwill= consideration + NCI – FV net asset at date of acquisitionAnd I understand that goodwill is both for parent and NCI already. So why do we need to calculate notional goodwill? Is that double calculation goodwill for NCI? Could you explain for me more understand?
Thanks for your time.
Hi,
You’re correct in your understanding of the full goodwill calculation. We have to calculate the notional goodwill when we’re calculating an impairment of goodwill when the goodwill has been calculated using the other method of valuing goodwill, the proportionate share of net assets method. It just then helps us work out the impairment allocated to the parent and that allocated to the NCI.
Thanks
Chris
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