Skip to content
Recognisition of goodwill
Hi Team
I am still trying to get my head around goodwill after reading all the materials. Hope someone can help clarify.
I wonder if "goodwill is only recognised on consolidation level."?
The reason I asked because from all the videos and examples I saw, it seems that Goodwill is worked out when:
we try to eliminate the equities from the subs, with the investment from the parent.
With this, we determine the value of goodwill from the consol. financial report, not from separate account already entered in the book (accounting software) during acquisition.
If above is true, then that leads to the question, shouldn't we recognise the goodwill (record it in separate account) during the acquisition?
If it's recorded at the inception, then from the balance sheet of parent, we will see 2 accounts, one is the "investment in sub" account, and the other one is "goodwill" account.
Top
Re: Recognisition of goodwill
Goodwill only exists in consolidation.
In the separate FS of the parent, you adjust debit investment and credit cash.
Its only in consolidation when the cash paid is more than the net assets you incorporated in the conso FS, that you "balance it" with goodwill.
Top
Re: Recognisition of goodwill
You should not have any variances in your equity after the acquisition Vs before.
Re: Recognisition of goodwill
Thanks Leo, that's reply really helped me clear all the "mystery" I been trying to resolve the past few days. Now I can confidently change the way how my template works
Initially I thought when paying for a company over the fair value we (from parent's book):
DR investment (non current asset)
DR goodwill (intangible asset)
CR cash (current asset)
And then I thought, if above is done, then how on earth the intercompanies eliminate as the asset recognized (fair value) from the parent will be different from the equity recorded (real money paid) from the subs if goodwill involved.
Top
Re: Recognisition of goodwill
On the below
"You should not have any variances in your equity after the acquisition Vs before.".
If the parent acquire (just say) 60%, that means there will be NCI (40% of subs equity) reported separately on the consolidated report at the equity section, so that will be the only "variance" if NCI is involved, is that correct?
Top
- IFRScommunity.comForums
- All times are UTC+02:00
- Delete cookies