Good will on consolidation-consolidated balance sheet, Financial Accounting

Assignment Help:

Good will on consolidation

Good will on consolidation arises when the purchase consideration paid by the holding company is different from the value of the net assets acquired in the subsidiary company.

If purchase consideration is more than net assets acquired, then the difference is positive goodwill and if purchase considered is less than net assets acquired, then the difference is negative goodwill.

Goodwill will thus be computed in the following  two ways:

 Method 1

 

 

£

£

Cost of investment in subsidiary

 

xx

less:

 

 

Ordinary share capital of subsidiary

x

 

Capital reserves or date of acquisition

x

 

Revenue reserves (retained profits) on date of acquisition

x

 

Shareholders funds on date of acquisition

xx

 

Holding company shares acquired

 

(x)

GOODWILL POSITIVE/NEGATIVE

 

xx

 

 

Method 2

 

 

£

Cost of investment in subsidiary

xx

Less:  share of net assets acquired (on date of acquisition)

(x)

 

xx/(xx)


NOTE: Total assets less total liabilities i.e. net assets is the  same as shareholders funds. The most common approach used in computing goodwill is by preparing an account called cost of control whereby the cost of investment is posted on the debit side and the holding company share of the ordinary share capital, capital reserves and revenue reserves on the date of acquisition in the subsidiary company are posted on the credit side. The balancing figure in that account is goodwill.


Related Discussions:- Good will on consolidation-consolidated balance sheet

Winding up under supervision-liquidation of companies, Winding up under sup...

Winding up under supervision Virtually obsolete, in consequence of s.303 and the power to invoke the court's assistance under s.301. If a supervision order is made, the effect

What is the impact on net income, The Budvar Company purchases parts from a...

The Budvar Company purchases parts from a foreign customer on December 1, Year 1, with payment of 20,000 crowns 20,000 crowns to be made on March 1, Year 2.  Budvar enters into a f

Rate of return on a stock, Suppose that the risk-free rate is 7% and that t...

Suppose that the risk-free rate is 7% and that the market risk premium is 7%. What is the needed rate of return on a stock with a beta of 1.2? What is the needed rate of retu

Determine annual effective cost, Q. Determine Annual effective cost? (...

Q. Determine Annual effective cost? (i) Payables policy One month cost of taking extended trade credit = 1.5/98.5 = 1.52% Annual effective cost = 1.015212-1 = 19.8%

It is started as "the MATCHING principle is very important w, What is the r...

What is the relation of profit and matching principle? Do you have a form for this kind of assignment in writting Financial Accounting?

Foreign currency translation, Foreign Currency Translation - Restating fore...

Foreign Currency Translation - Restating foreign currency in equivalent dollars; unrealized losses or gains are postponed and carried in Stockholder's Equity until foreign operatio

Bank reconciliation statement, in bank reconciliation statement what are th...

in bank reconciliation statement what are the statement to be reconcile

Calculate the intrest rate and discount rate, You are considering whether o...

You are considering whether or not to go to graduate school. Well... there are many things to consider, of course, such as the type of job you would thus get, the opportunity to li

Conditions of a will-executorship laws and accounts, Conditions of a will ...

Conditions of a will A written will is not valid unless it fulfills the following conditions. 1) The testator must sign the will; or he must affix his mark to the will (i.e. a

Reconciliations, What is the best way of doing reconciliations of control a...

What is the best way of doing reconciliations of control accounts like Purchases Ledger Control vs Purchases Ledger and Sales Ledger Control vs Sales Ledger

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd