If XYZ acquired identifiable net assets of $152,000 mil, it means that the
goodwill attributable to the parent company ($48,000 mil) represents 31.579%. Using
the same reasoning, the goodwill attributable to the minority interest (which is $38,000
mil) is $12,000 mil.
So, the goodwill attributable to the cash-generating unit is $60,000 mil,
respectively the sum of the goodwill attributable to the parent company ($48,000 mil)
and the unrecognized goodwill attributable to the minority interest ($12,000 mil).
$ Mi
|
__________________Items__________________ |
Goodwill |
Net Assets |
Total |
|
Carrying amount of net assets acquired |
48,000 |
190,000 |
238,000 |
|
(-) Amortization_________________________ |
- |
(19,000) |
(19,000) |
|
= Net carrying amount_________________ |
48,000 ~ |
171,000 |
219,000 |
|
(+) Unrecognized minority interest_______ |
12,000 |
- |
12,000 |
|
= Adjusted carrying amount_____________ |
60,000 |
171,000 ^^ |
231,000 |
|
(-) Recoverable amount_________________ |
- |
(160,000) |
(160,000) |
|
= Impairment loss______________________ |
60,000 ~ |
11,000 |
71,000 |
The results presented in the table above indicate that the cash-generating unit
ABC is impaired, the impairment loss being $60,000 mil.
But XYZ recognizes only the part of the goodwill which corresponds with its
parent interest (80%), therefore XYZ should recognize only 80% of the loss from
depreciation of goodwill, respectively $48,000 mil (60,000 × 80%). So the goodwill has
to be eliminated completely. Remaining impairment loss of $11,000 mil is recognized
by reducing the values of identifiable assets of ABC, as it can be seen in the table
below.
$ Mi
|
___________________Items___________________ |
Goodwill |
Net Assets |
Total |
|
Carrying amount of net assets acquired______ |
48,000 |
190,000 |
238,000 |
|
(-) Amortization___________________________ |
- |
(19,000) |
(19,000) |
|
= Net carrying amount____________________ |
48,000 ^ |
171,000 |
219,000 |
|
(-) Impairment loss_________________________ |
(48,000) |
(11,000) |
(59,000) |
|
= Recoverable amount____________________ |
- |
160,000 |
160,000 |
Because the goodwill is not considered likely to be recovered entirely through
profitable operations of the acquired company, it should be reduced or eliminated
completely. Any elimination of goodwill should be recognized as an expense.
Once reduced, goodwill can not be passed as an asset, reflecting once again that
independent measurements are not possible and the acquired goodwill might be
replaced by those generated internally, which is not recognized.
Recognizing and measuring goodwill impairment loss based on IFRS 3
(Revised)
To take into account the option to apply the “full goodwill method”, the
principles regarding the measurement of goodwill impairment based on IFRS 3 (2004)
have now been expanded on as follows:
(a) In the case of a partially-held subsidiary, which is in itself a cash-generating
unit, the impairment loss is allocated between the parent and the non-controlling interest
on the same basis as that on which profits or losses are allocated.
(b) In the case of a partially-held subsidiary that is part of a larger cash-
generating unit, impairment losses are allocated to the parts of the cash generating unit
that have non-controlling interest and those that do not, as follows: