Impairment review of proportonate goodwill

All topics related to IFRS Standards.
Post Reply
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Impairment review of proportonate goodwill

Post by Leo »

Hi,

The idea of an impairment review of porportionate goodwill vs gross goodwill is that, when it's a proportionate goodwill, NCI is not impacted.

But I don't understand how it could be unless there are other mechanims stated somewhere else I missed, since impairment is recorded in the P&L, and the net result is mathematically splitted between parent and NCI, impairment of goodwill will definitly impact NCI ?

Is there something I missed out ?

Thanks

https://www.accaglobal.com/uk/en/studen ... st%20(NCI).
User avatar
Marek Muc
Site Admin
Posts: 3228
Joined: 15 Oct 2018, 17:21
Contact:

Re: Impairment review of proportonate goodwill

Post by Marek Muc »

Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Impairment review of proportonate goodwill

Post by Leo »

thanks Marek, my question was on the proportionate method, since the goodwill is not allocated to NCI, but if impairment is recorded in the P&L, it will undoubtedly impact NCI.

How is that possible to charge something in P&L and not impacting NCI ?
Attachments
2022-08-29_12h58_34.png
JRSB
Trusted Expert
Posts: 1309
Joined: 01 Mar 2020, 01:10
Location: UK

Re: Impairment review of proportonate goodwill

Post by JRSB »

There's no automatic allocation to NCI in the group P&L though is there, only split to NCI if the loss is in a sub with minority interests or other matter applicable to NCIs. In this case there wouldn't be.
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Impairment review of proportonate goodwill

Post by Leo »

Still not clear for me. How you can charge something in the PL without impacting NCI?
User avatar
Marek Muc
Site Admin
Posts: 3228
Joined: 15 Oct 2018, 17:21
Contact:

Re: Impairment review of proportonate goodwill

Post by Marek Muc »

Well, strictly speaking, you actually don't charge to P&L the impairment loss relating to NCI's interest in goodwill since it hasn't been recognised under IFRS 3.19(b). Make sure to familiarise yourself with Appendix C to IAS 36
IAS 36 App C.PNG
pub_acco
Trusted Expert
Posts: 328
Joined: 19 Mar 2020, 16:40

Re: Impairment review of proportonate goodwill

Post by pub_acco »

Consolidated financial statements consist of separate FSs of parent and subsidiaries and consolidation adjusting entries. You can record and write down partial goodwill through consolidation adjusting entries. Separate PL of a subsidiary is usually auto-allocated to NCI by consolidation software, but you are not obligated to attribute consolidation adjusting entries to NCI.
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Impairment review of proportonate goodwill

Post by Leo »

Does it mean that the impact in the PL is not splitted between Group and NCI
pub_acco
Trusted Expert
Posts: 328
Joined: 19 Mar 2020, 16:40

Re: Impairment review of proportonate goodwill

Post by pub_acco »

Nope. Impairment losses on partial goodwill directly hit the profit attributable to owners of parent.
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Impairment review of proportonate goodwill

Post by Leo »

got it...

It's true that I've never paid attention to this. So, in case that a group hasn't realised any activities, and recorded only an impairment loss on the goodwill arising from acquisition of a company for 60% of the shares, the consolidated profit & loss statement will be the following :

Operating result -10

Profit attributable to parent -10

Profit attributable to mino: 0

But if the goodwill initially recorded was by using gross goodwill method, then, the consolidated P&L would be the following :

Operating result -10

Profit attributable to parent -6

Profit attributable to mino : -4

It's true that I relied on consoldiation software on this, and attribution of profit and loss are automatically done by the software. I had never recalled doing a manual adjustment to reallocate the -4 in from mino to parent when it's a partial goodwill.
User avatar
Marek Muc
Site Admin
Posts: 3228
Joined: 15 Oct 2018, 17:21
Contact:

Re: Impairment review of proportonate goodwill

Post by Marek Muc »

Not exactly right, total impairment charged to P&L would be higher under the second approach
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Impairment review of proportonate goodwill

Post by Leo »

yes yes, except that is it correct ?

Thanks Marek, here we go :

got it...

It's true that I've never paid attention to this. So, in case that a group hasn't realised any activities, and recorded only an impairment loss on the goodwill arising from acquisition of a company for 60% of the shares, the consolidated profit & loss statement will be the following :

Operating result -10

Profit attributable to parent -10

Profit attributable to mino: 0

But if the goodwill initially recorded was by using gross goodwill method, then, the consolidated P&L would be the following :

Operating result -16.67

Profit attributable to parent -10

Profit attributable to mino : -6.67

It's true that I relied on consoldiation software on this, and attribution of profit and loss are automatically done by the software which is splitting the -10 into -6 for the group and -4 for the mino. I had never recalled doing a manual adjustment to reallocate the -4 in from mino to parent when it's a partial goodwill. I guess in that case, I should do a manual adjustment.
User avatar
Marek Muc
Site Admin
Posts: 3228
Joined: 15 Oct 2018, 17:21
Contact:

Re: Impairment review of proportonate goodwill

Post by Marek Muc »

yes, but remember about: viewtopic.php?p=6845#p6845
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: Impairment review of proportonate goodwill

Post by Leo »

Thanks Marek
Post Reply