F2 - Goodwill Calculation

Replies : 3
Keywords: F2 - Goodwill


Please could someone help me on the following question. I have been going round in circles with it:

Its a test your understanding question from the ftc notes. (Chapter 7 page 223 Kathmandu)

Im struggling to understand how they get the answer for goodwill???

Info Given:

On 1st Jan 2005 Kathmandu acquired 70% of the shares of Nepal for 100,000dollars when fv of Nepals net assets were 120,000dollars. Nepal has equity capital of 50,000dollars. At this date, the fv value of goodwill attributable to the N-C-I WAS 2,000dollars. Goodwill is to be accounted for using the full method. No goodwill has been imapired.

Their working for goodwill in  the asnwer was as follows:

Cost                                      100,000

Share of net assets acquired

(120,000  x 70%)                    84,000

Goodwill Parents Share =         16,000


NCI Share in Goodwill (per Q)   2,000

Gross Goodwill                         18,000


Why do we not need to minus from the nci figure the share of nci % of the net assets at aquisition????? as per the proforma workings i have seen in the previous chapters??

Any help would be greatly appreciated.


Many Thanks  





its the grossing up of goodwill under ifrs3.


in my material from firstintuition: " ifrs3 business combinations introduced an alternative method for the calculation of goodwill, the standard now allows teh acquirer to measure goodwill under a gross(full method)" 


you are accounting for 100% of the goodwill.


the accounting entry will be:

dr goodwill

cr nci


Hi Pieter,


I understand that their are two methods of calculating goodwill now one being the proportionate method and one being the full method as you have mentioned.

What i dont understand with this question is that it differs from the proforma i am use to using:


Fair Value of NCI @ Acquistion                                           X

Less NCI % of Subsids net assets @ Acquisition                  (x)

= nci figure to be added to the parent share of goodwill


Where as on the example above it doesnt add any line in for the NCI % of subsids net assets that should be deducted from the fv of nci???? Or am i getting this completely wrong?


NCI goodwill

I think it's because the info given in the question is the fv of the GOODWILL attributable to the NCI ie 2,000.

If the question had said the fair value of the NCI at acquisition was 38,000 you could have used your proforma to calculate the goodwill attributable to the NCI:

Fair value of NCI at acquisition: 38,000

less NCI share NA (30% x 120): (36,000)

Goodwill attributable to NCI     : 2,000 which is added to the parent's share of goodwill.

It just happens that in the question they give you that 2,000 figure instead of the 38,000 one you are used to.