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Dear sir,
In Part (c) Answer: Add back negative goodwill:(2.5 + (9×70% ‘NCI’)– 9)
Could you please explain why the negative goodwill has been added back to the cost of investment and it’s calculation?
Thank sir
Calculation:
Cost 1 x 2.5 = 2.5
Share of net assets 30% x 9 = 2.7
Negative goodwill = 0.2Logic (from IAS plus)
Implicit goodwill and fair value adjustments. On acquisition of the investment in an associate, any difference (whether positive or negative) between the cost of acquisition and the investor’s share of the fair values of the net identifiable assets of the associate is accounted for like goodwill in accordance with IFRS 3 Business Combinations. Appropriate adjustments to the investor’s share of the profits or losses after acquisition are made to account for additional depreciation or amortisation of the associate’s depreciable or amortisable assets based on the excess of their fair values over their carrying amounts at the time the investment was acquired. [IAS 28.23]
Last examined (I think) 2007
Status – prizewinner!
hi sir, thank u for ur explanation. can we conclude as follows:
Negative GW
DR NCA-Cost of investment in assoc (to increase CA of Assoc, hence the ‘add back’)
CR P/L Gain on bargain purchasePositive GW
DR P/L Impairment
CR NCA-Cost of investment in assoc (to decrease CA of Assoc, need to minus as per IAS 28 formula)My apologies for the awkward question. My final mock class exam is this Saturday. Need help urgently. thanks!
Sorry. For positive goodwill there should be no entry. Impairment calc applies to both positive n negative GW.
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