Ot course notes page 43 example 9 (Robertas and Ingrida's que)

Hi Sabrin

Negative goodwill is added to group retained earnings at the earliest opportunity ( this is clearly stated in the course notes! ). The rationale is that we have paid less for our investment than our share of the fair valued net assets acquired. It’s a bargain purchase – we’ve acquired fair valued assets worth ( say ) $50,000 but only paid ( say ) $40,000 for those assets

In simple double entry terms, Debit various assets acquired at fair value ( say ) $50,000, Credit purchase consideration ( say cash ) $40,000 but where’s the other $10,000 credit? It’s going to create a negative balance in the Goodwill Account and will go from there to Retained Earnings at the end of the first year

What’s the problem with positive goodwill where it’s a mid-year acquisition? Working 2 – Goodwill – is calculated in the normal way.

No problem

Because the share premium arises upon the issuing of shares. When did Ingrida issue shares? On incorporation, and that was BEFORE acquisition date.

Does the share premium not feature as part of the FV of SNA @DOA?

It will NEVER be the case at F7 and unlikely at P2 that a subsidiary will issue shares post-acquisition

Ok?

Correct.

In the highly improbable situation where there IS a post acquisition movement in the share premium account, only the post acquisition element would be included …… but it won’t happen!