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CONSOLIDATION

Shubham (student) (73 Points)

21 September 2020

Do we need to calculate goodwill on date of investment on each balance sheet date for consolidation purpose or once calculated directly post profit are added to combined profit and loss.

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 21 September 2020

Goodwill is acquired on the date of acquisition (investment or consideration paid) and revised annually on the balance sheet date for any impairment writedowns.

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Shubham (student) (73 Points)
Replied 21 September 2020

So do we need to prepare Association of Profits each year i.e pre and post profits or we need to just calculate goodwill as all profits after that will be post acquisition. i.e if i acquired a company 10 years ago do i need to prepare list of all pre and post profits and classify ?

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 21 September 2020

If the acquisition occurred 10 years ago, no need to do pre and post acquisition analysis. One can straight away use the subsequent goodwill measurement. Let me check IndAS 103...

Goodwill is the difference between A) -the considerations transferred + the amount of any non-controlling interest in the acquiree and + the acquisition-date fair value of any previous equity interest in the acquire Over b) -over the fair value of the identifiable net assets acquired. Goodwill is recognised as an asset but not amortised but tested for impairment or more frequently if there is a scent/symptom of impairment.

A-B= Goodwill. This is initial recognition. After that, goodwill is treated like an intangible asset as per IndAS 38 and impairment test as per IndAS 36 is conducted and subtracted from goodwill annually until it becomes nil. For this, you don’t need pre and post acquisition, cancellation problems to measure goodwill in the subsequent years. It would have been easier for everyone if subsequent measurement included Goodwill as well in IndAS 103 like IFRS 3.

Read more at: https://www.caclubindia.com/articles/ind-as-103-on-business-combination-26081.asp

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 21 September 2020

If you are an accountant, go through pages 61- few pages to understand initial Goodwill is treated. This is very useful resource.

https://www.mca.gov.in/Ministry/pdf/Ind_AS36.pdf

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Shubham (student) (73 Points)
Replied 21 September 2020

Thankyou

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 22 September 2020

No problem! Actually you can request your lecturers to recommend that curriculum include subsequent measurement formula and working examples in IndAS 103 and then people can understand it in a fair way avoiding confusions. I know it as cost less accumulated impairment and impairment is subtract acquired goodwill. This will give its carrying amount. This is something which I have noticed as missing in theory.