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what is the rationale for recognising “negative
goodwill” immediately in profit or loss whereas its binary opposite, positive
goodwill, is deferred and is only recognised in profit or loss when it is assessed
as impairedHi,
If you think of positive goodwill as a debit balance then it is treated as an asset as it is a resource that gives probable future economic benefit.
Negative goodwill is the opposite and so must be a credit balance. Credit balances are either liabilities, income or capital. The purchasing company doesn’t owe anything so it cannot be a liability, nor is there any money owed to the owners so it cannot be capital.
It is therefore income, as effectively we are buying the subsidiary at a discount, which is beneficial to the parent and so income.
Hope this helps clear it up.
Thanks
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