Question

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

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