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CS Professional · Corporate Restructuring, Valuation and Insolvency · Accounting in Corporate Restructuring: Concept and Accounting Treatment

Ganga Ltd acquires 80% of Yamuna Ltd for Rs 96 crore. Fair value of Yamuna's identifiable net assets is Rs 100 crore. The fair value of the 20% non-controlling interest is Rs 22 crore. Ganga elects to measure NCI at fair value. What goodwill arises?

Goodwill is Rs 18 crore: consideration of Rs 96 crore plus non-controlling interest at fair value of Rs 22 crore, less identifiable net assets of Rs 100 crore. Rs 16 crore would result only if NCI were measured at its proportionate share of net assets, which was not elected.

  1. ARs 16 crore
  2. BRs 18 croreCorrect
  3. CRs 22 crore
  4. DRs 14 crore

Explanation

Goodwill = consideration 96 + NCI at fair value 22 - net assets 100 = Rs 18 crore. Using NCI at proportionate share (20 crore) would give 16 crore, which ignores the fair value election. Ignoring NCI altogether gives a negative 4, and 96 - 80 = 16 is the partial goodwill method.

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