Page 251 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Basic group accounts – goodwill and joint arrangements

IFRS 3 Business Combinations

1.1 IFRS 3 Business combinations

The calculation of goodwill is set out in IFRS 3 Business Combinations.

Goodwill is the excess of the amount paid to acquire a subsidiary
above the value of the subsidiary’s net assets.

Per IFRS 3, goodwill is calculated as:

FAIR VALUE of consideration paid (cost) x
NCI at acquisition x FV method or proportionate
less method?
FAIR VALUE of S’s net assets at
acquisition (x)
––––
GW at acquisition x
––––

IFRS 3 outlines how to determine the FV of consideration paid and
the FV of S’s net assets at acquisition.

Each component is separately considered in the following sections.

243