ACCA Strategic Professional · Strategic Business Reporting (International) · Group accounting including statements of cash flows
Epsilon acquired 60% of Zeta for $9m when Zeta's identifiable net assets had a fair value of $10m. NCI is measured at its proportionate share of net assets. What is goodwill at acquisition?
Goodwill is $3.0m. Add consideration of $9m and NCI at 40% of $10m net assets, which is $4m, giving $13m, then deduct the $10m fair value of net assets acquired.
- A$3.0mCorrect
- B$4.0m
- C$1.0m
- D$5.0m
Explanation
Goodwill = consideration $9m + NCI (40% × $10m = $4m) − net assets $10m = $3m. Using full fair value of NCI is not given, so the proportionate method applies. Ignoring NCI would give a wrong figure of negative $1m.
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