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MikeLittle.
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Candy
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Dear Mike,
I really struggled to understand this goodwill and the b/f, this is the first time i am coming across it would appreciate your help.
Goodwill had been impaired by 80% as at 31 December, 2009 and is now to be fully impaired???
I understand W2 – 600 x 10% = 60 NCI
My workings:
GW – 3000
Less GW impaired by 80% = 2400Therefore = 600 remaining for this year
But then in W3 – Less GW 2700?? Where does the 2700 come from
Please, please explain this to me, I was doing so well until here, this really shot my confidence.
MikeLittle
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Working W3 Consolidated retained earnings
H’s own +
H’s share of S post-acq retained –
Goodwill impaired since acquisition (just our share)
90,000 +
90% x 40,000 –
90% x 3,000
So: 90,000 + 36,000 – 2,700 = 123,300
OK?
Candy
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Hi Mike thanks for your prompt response,
Unfortunately I am still confused.
I recall you saying treat Revaluation surplus like Retaining Earnings, therefore I added it
W3,
H – 90 + 50 = 140
S – 15 + 40 = 55
And then I continued, should I avoid starting of this way?
But also, I still cannot see where £2700 comes from?
Please explain how to deal with – “Goodwill had been impaired by 80% as at 31 December, 2009 and is now to be fully impaired.”
I am struggling with this.
Many thanks
MikeLittle
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“Please explain how to deal with – “Goodwill had been impaired by 80% as at 31 December, 2009 and is now to be fully impaired.””
Goodwill was calculated at 3,000
It had been impaired by 80% = 2,400
Now we need to impair by the remaining 600
So, for working W3, goodwill has been impaired by the full 3,000
Back to the “song”:
H’s own +
H’s share of S post-acq retained –
Goodwill impaired since acquisition (just our share)
Goodwill impaired since acquisition is now 3,000
Our share of 3,000 is 90%
90% of 3,000 is 2,700
What is there not to understand?
As for the revaluation reserve, it is treated the same as retained earnings. That is, the same old song applies!
H’s own +
H’s share of S post-acq retained –
Goodwill impaired since acquisition (just our share)
Technically I suppose that a fair value adjustment upwards could go into a revaluation reserve. I tend to simply include them within retained earnings. But if you’re given a revaluation reserve in the question, then keep it separate. But the TREATMENT is the same as for retained earnings
Candy
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