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Proportionate share of net assets goodwill method – Query

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Proportionate share of net assets goodwill method – Query

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by Stephen Widberg.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • March 17, 2021 at 6:40 pm #614626
    jareerabedin
    • Topics: 91
    • Replies: 72
    • ☆☆

    Dear Sir,
    Under the proportionate share of net assets goodwill method, NCI is being valued at its proportionate % of net assets. So then, why is the resulting goodwill only the parent’s goodwill?
    If you could kindly explain, that would help me out a lot

    Is it because the NCI % share of goodwill is being cancelled out by adding the share of net assets?

    Thank you sir

    March 18, 2021 at 11:40 am #614671
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2518
    • ☆☆☆☆☆

    A buys 80% of B for 100. B’s NA are 120.

    Goodwill (official calculation)

    COST 100
    NCI (20% x 120) 24
    Less NA (120)
    GOODWILL 4

    Now an unofficial calculation:
    COST 100
    Less %NA ((80% x 120) (96)
    GOODWILL 4

    Can you see that in prop. goodwill I am effectively comparing the cost to the parent with the share of net assets acquired by parent? So it is goodwill ONLY on parent’s investment in sub.

    March 18, 2021 at 3:39 pm #614690
    jareerabedin
    • Topics: 91
    • Replies: 72
    • ☆☆

    Thank you so much sir for making it so simple 🙂
    Highly appreciate it

    March 19, 2021 at 12:49 pm #614784
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2518
    • ☆☆☆☆☆

    My pleasure

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