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Practice question – 3 Gill and Job pg: 252

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Practice question – 3 Gill and Job pg: 252

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by MikeLittle.
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  • January 23, 2016 at 8:44 pm #297631
    Candy
    Member
    • Topics: 135
    • Replies: 79
    • ☆☆☆

    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% = 2400

    Therefore = 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.

    January 24, 2016 at 9:23 am #297669
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    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?

    January 24, 2016 at 8:07 pm #297738
    Candy
    Member
    • Topics: 135
    • Replies: 79
    • ☆☆☆

    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

    January 25, 2016 at 9:56 am #297790
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    “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

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