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ACCA Strategic Professional · Strategic Business Reporting (International) · Group accounting including statements of cash flows

Rho held 25% of Tau (an associate, carrying amount $3m) and acquires a further 35% for $7m, gaining control. The fair value of the original 25% is $4m, and the fair value of the NCI (40%) is $6m. The fair value of Tau's identifiable net assets is $15m. What goodwill is recognised on consolidation?

Goodwill is $2m. It is calculated as the consideration of $7m plus the previous 25% interest at fair value of $4m plus the NCI at fair value of $6m, which is $17m, less identifiable net assets at fair value of $15m.

  1. A$2mCorrect
  2. B$3m
  3. C$1m
  4. D$4m

Explanation

Goodwill = consideration $7m + fair value of previous interest $4m + NCI at fair value $6m = $17m, less net assets $15m, giving $2m. Using the old carrying amount of $3m would produce $1m. Using the NCI at the proportionate share would give a different amount.

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