Dear Members
Please advice on the below query
Company A buys 70% shares of Company B and become the holding company during 2008. so while preparing accounts for the year 2008, goodwill is calculated. Now in 2009, Company A acquires additional shares but the share holding remains the same. so while preparing accounts for 2009, do we need to calculate goodwill again? if yes whats is best method.
please advice
best regards
Goodwill calculation – http://www.ifrslist.com/2010/09/goodwill…
hi, I don’t think that you need to calculate goodwill again, once goodwill has been accounted, it need to be tested once one year to see if it is impaired based on the fair value.
If I understood correctly, goodwill has arisen from the initial purchase in 2008. There has been additional purchase of shares in 2009 without impact on shareholding percentage – which I understand that the new purchase is only relating to issue of new shares for a capital increase. If that is the case, you do not need to calculate any goodwill for capital increase.
However, you have to perform impairment testing on goodwill for each reporting period. For impairment testing, you will need to employ valuation techniques for the investment and test about whether the consideration paid for the purchase is high or low in conjunction with the performance of the purchased entity. Any lower value calculated shall mean that the investment has impaired, and the impairment amount is to be directly recognised in profit and loss account by a credit to initial goodwill booking. Any increase in value is not to be booked.
if company A buys more shares, why does its percentage holding remain unchanged? By buying new shares, it should be reducing the non-controlling interest.
as per IFRS 3R,GW is calculated only once at the time of acquisition (ie when control is acheived). Post acquisition if there is any change in shareholding (buying new shares or selling few shares)which do not result in loss of control, NO Gw will be recognisied, and it will be treated as a transcations between the equity holders only.
So, suppose your co. buy additional shares. JE’s will be as uner
NCI DR
Cash CR
Equity DR/CR (balancing fig)
I think you need to calculate it only once.
As i see, the company has subscribed to a new issue but the % shareholding remains the same. Under, any new share acquisition post you have obtained control does not give rise to any further goodwill.In other words, goodwill be computed only when control is obtained and will be adjusted only when control is lost. All other adjustements in the spectrum will be made to equity.