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Problem 3: Impairment of Goodwill on Acquisition On 1 April 2013 IUJ acquired 100% of the...

Problem 3: Impairment of Goodwill on Acquisition On 1 April 2013 IUJ acquired 100% of the equity shares of A and B as follows: A B $000 $000 Cost of acquisition 850 610 Fair value of net assets at date of acquisition 750 500 At 31 March 2014 IUJ carried out an impairment review of the goodwill arising on both acquisitions. At 31 March 2014: • the goodwill in A was NOT impaired but had actually increased in value by $40,000. • the goodwill in B had been impaired by $20,000. Required: (i) Explain how IUJ should account for the changes in goodwill values at 31 March 2014 and (ii) Calculate the goodwill that will be included in its statement of financial position at

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Answer #1
Goodwill
Company A Company B
Purchase Consideration 850 610
Fair Value of net assets 750 500
Goodwill 100 110
The increase in Value of goodwill by $ 40,000 cannot be recognised and hence to be ignored as per IFRS
The Goodwill in the financial position would be $ 100000
Goodwill of Company B 110
Impairment 20
Goodwill of Company B as on 31st March 2014 90
The impairment of goodwill of company A would be reduced from the goodwill in the financial position and debited under profit or loss
The goodwill in the financial position would be $ 90000
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