Goodwill Flashcards
1
Q
Reasons to pay more than assets - liabilities for a company
A
- brand
- customer lists
- experience
- key personal
2
Q
Goodwill
A
Intangible asset that arrises when the purchase price to acquire a subsidiary is greater than the sum of the fair value of assets minus liabilities.
3
Q
fair value measurement
A
- sum of the fair values at date of acquisition rather than historical cost
4
Q
negative goodwill
A
- the gain from a bargain purchase
- recognised immediately in the income statement (IFRS3)
5
Q
positive goodwill
A
- intangible asset recognised in the SOFP
- no amortisation (IFRS3)
- apply impairment test (IAS36)
6
Q
Proportion of net assets method
A
recognises parent’s share of the goodwill in the CSOFP based on the portion of net assets the parent owns
7
Q
fair value model (method two)
A
- determined on the basis of the market prices for shares not acquired by the parent
8
Q
when can goodwill no longer demonstrate financial results that were expected at the time of acquisition
A
- change in economic conditions
- increased competition
- loss of key personal
- regulatory action
- brand or product issues
9
Q
journal entries for impairments relating to the current year
A
- debit - impairment loss - income statement
- credit - positive goodwill
10
Q
journal entries for impairments relating to the previous year
A
- debit - retained earnings
- credit - positive goodwill
11
Q
when is there impairment?
A
if the recoverable amount is less than the carrying amount
