04-20-2010, 08:46 PM
Calculation of goodwill is categorised under two heads 1) partial goodwill method 2) Full goodwill methhod
Under partial goodwill method only Parent's shareholding is considered
For example
Cost of the Investment is Rs....1200000
Acquired interest in the subsidiary's assets is 80%
subsidiary's net identifiable assets are 1400000
So here the amount of goodwill is to be calculated as
Cost of Investment 1200000
Net assets of subsidiary 1400000
Parents interest (80%) (1120000)
goodwill 80000
Under full goodwill method minority's interest of goodwill is also included.The fair value of minority's interest is taken care of and either to be calculated or is given in the question.
Keeping other things same as in the above example now we calculate goodwill under full method when the fair value of minority's interest is 350000
the Full goodwill is
cost of Investment 1200000
Subsidiary's net assets 1400000
Parents share (80%) (1120000)
Parents share of goodwill 80000
Fair value of minority's interest 350000
subsidiary's net assets 1400000
Minority's interest (20%) (280000)
Minority's share of goodwill 70000
Total goodwill 150000
Under partial goodwill method only Parent's shareholding is considered
For example
Cost of the Investment is Rs....1200000
Acquired interest in the subsidiary's assets is 80%
subsidiary's net identifiable assets are 1400000
So here the amount of goodwill is to be calculated as
Cost of Investment 1200000
Net assets of subsidiary 1400000
Parents interest (80%) (1120000)
goodwill 80000
Under full goodwill method minority's interest of goodwill is also included.The fair value of minority's interest is taken care of and either to be calculated or is given in the question.
Keeping other things same as in the above example now we calculate goodwill under full method when the fair value of minority's interest is 350000
the Full goodwill is
cost of Investment 1200000
Subsidiary's net assets 1400000
Parents share (80%) (1120000)
Parents share of goodwill 80000
Fair value of minority's interest 350000
subsidiary's net assets 1400000
Minority's interest (20%) (280000)
Minority's share of goodwill 70000
Total goodwill 150000
