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Hello Sir,
Please, kindly help me with this.
In the workings for the Impairment of Park(W6), Notinal NCI was added to Goodwill on the basis that, Goodwill has been calculated using
the proportionate basis, and so when performing an impairment review, the goodwill must be grossed up to include the NCI’s interest.Now, The Full method of calculating goodwill requires the comparison of the Fair Value(FV) of the whole subsidiary
(as represented by the fair value of the considereation given by the parent and the fair value of the non controlling interest)
with all of the fair value of the net assets of the subsidiary.The calculation of Goodwill in Park, when compared to the requirements of the Full/Gross method shows that Goodwill in Park was
calculated on a full/ gross basis, not proportionate basis.Question: Why did examiner state that “goodwill has been calculated on a proportionate basis”
Hi,
The goodwill in Park has been calculated using the proportionate basis, thus following the instructions in the question. I think the issue that you have is that the layout of the goodwill calculation looks slightly different to what you’re used to.
Instead of adding the NCI share of net assets and then deducting the net assets in full, an alternative presentation is to just deduct the share of net assets acquired.
Thanks
Hi Sir,
Please I’ve been contemplating this issue for quite some time now, but still nothing shows to me that the goodwill was computed on a proportionate basis.
Please sir, can you show to me why you believe the goodwill ($80m) was calculated using the proportionate basis?
Hi,
Wow! 5 months is a long time to be contemplating the issue……..!
The calculation of the goodwill is done in the examiner’s first working. They have used the short cut method by deducting 60% of the net assets, which gives the same answer as adding the 40% NCI share and then deducting the 100% net assets. Try it and you will find the answer is the same at 80.
Hope that finally clears it up for you.
Thanks
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