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CS Executive · Corporate Accounting and Financial Management · Consolidation of Accounts

Which statement about goodwill arising on consolidation is correct as per the official text of AS 21 and Ind AS 110?

Under AS 21, the excess of the parent's cost of investment over its portion of the subsidiary's equity at the date of investment is described as goodwill and recognised as an asset in the consolidated statements. Ind AS 110 leaves goodwill measurement to Ind AS 103.

  1. AUnder AS 21, excess of cost over the parent's portion of equity is described as goodwill and recognised as an asset in the consolidated financial statementsCorrect
  2. BUnder AS 21, excess of cost over the parent's portion of equity is credited to capital reserve
  3. CInd AS 110 itself prescribes how goodwill on a business combination is measured
  4. DUnder AS 21, goodwill is deducted from the minority interest

Explanation

AS 21 para 13(b) states the excess of cost over parent's portion of equity is goodwill recognised as an asset. Ind AS 110 states it does not deal with goodwill on a business combination; that is covered by Ind AS 103.

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