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Stephen Widberg.
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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Proportionate share of net assets goodwill method – Query
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
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.
Thank you so much sir for making it so simple 🙂
Highly appreciate it
My pleasure