ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Omega Co acquired 80% of Sigma Co for $720,000. At acquisition Sigma's net assets at fair value were $800,000. NCI is measured at proportionate share of net assets. At the year end goodwill was impaired by $30,000. What goodwill is shown in the consolidated statement of financial position?
Goodwill is $50,000. Initial goodwill is consideration of $720,000 plus NCI of $160,000, less net assets of $800,000, giving $80,000. Deducting the $30,000 impairment leaves $50,000. Adding the impairment, or ignoring it, would give incorrect figures.
- A$80,000
- B$50,000Correct
- C$110,000
- D$30,000
Explanation
Goodwill = 720,000 + (20% x 800,000 = 160,000) - 800,000 = $80,000. After impairment of $30,000 the carrying amount is $50,000. $110,000 wrongly adds the impairment, and $80,000 ignores it.
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