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Chapter 20

Example 12.2 cont'd

(W2) Net assets of subsidiary
Acquisition Reporting date Post-acquisition
$000 $000 $000
Share capital 1,800 1,800
Retained earnings 1,710 2,610 900
––––––– ––––––– –––––––
3,510 4,410 900
––––––– ––––––– –––––––
(W3) Goodwill

$000
Fair value of P's investment 4,500
NCI at fair value at acquisition 1,080
Less: S's net assets at acquisition (W2) (3,510)
––––––
Goodwill at acquisition 2,070
Impairment (270)
––––––
Goodwill at reporting date 1,800
(W4) Non-controlling interest

$000
Value of NCI at acquisition (W3) 1,080
NCI% × post acquisition reserves (20% × 900 (W2)) 180
NCI% × impairment (20% × 270 (W3)) (54)
––––––
1,206
––––––
(W5) Reserves

Retained earnings
$000
100% Parent's reserves 3,870
P% of S’s post acquisition profit (80% × 900 (W2)) 720
Impairment (80% × 270 (W3)) (216)
––––
4,374
––––
As the Tony group uses the fair value method to value goodwill, the impairment
of the goodwill will be split between parent and the NCI using the respective %
shareholdings.

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