24 September 2010
Hi Anand, the answer to ur Question is : (A)As per AS 14, In case of acquisition, if purchase consideration (net payment) is more than net asset, the difference is debited to goodwill A/c under purchase method. This Goodwill is required to be amortised to income on a systematic basis over its useful life (which should not exceed 5 years) (B)In case of amalgamation in the nature of merger, if new capital issued is more than old capital cancelled, difference is oodwill and is adjusted in reserves. (C) As per IFRS 3 'Business Combinations', all the business combinations are to be accounted for by applying only purchase method and excess consideration paid over net fair value of assets, liabilities and contingent liabilities assumed will be recognised as goodwill. This goodwill will not be amortised at all but will be tested for impairment each year. (D) Goodwill as per AS 21 'Consolidated financial statements' :Any excess of cost to the parent of its invt. in subsidiaryover the parent's portion of equity of subsidiary as on the date of invt. is Goodwill. there is no requirement under AS 21 for writing off goodwill by charge to P/L A/c. However, at each balance sheet date, it will be tested for impairment. (E) As per IAS 27, Goodwill arising on consolidation should be tested for impairment annually but should not be amortised. Regards, CA Shakuntala Chhangani
12 October 2010
Hi again Anand, goodwill will never arise on consolidation. It is always calculated as on the date of investment. It is the result of net payment being more than net assets. If invt is acquired on the last day of the accounting year then u will eliminate invt and merge net assets of acquiree co. in the book while preparing CFS. but if the acquisition date is different from consolidation date then meanwhile the acquiree co. will make some profit or loss. u need to book the same in ur accounts(consolidated P/L A/c). Because of this profit appearing on liab. side, the value of asset will also change at the time of consolidation. Therefore u take the closing value of assets and the original value of goodwill at the time u consolidate the acounts. Regards, CA Shakuntala Chhangani
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