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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 lotIs it because the NCI % share of goodwill is being cancelled out by adding the share of net assets?
Thank you sir
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 4Now an unofficial calculation:
COST 100
Less %NA ((80% x 120) (96)
GOODWILL 4Can 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.
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