WHAT IS NEGATIVE GOODWILL IN CONSOLIDATION

Negative goodwill:
If the net equity the fair value of the net assets at the time of acquisition is less tha its book value it means that in the transaction of purchase there is a bargain purchase.The difference between the net equity and the cost of investment is negative goodwill.
What is the impairment of goodwill?
While performing consolidation goodwill can be classified into two major categories
Impairment of goodwill (when NCI on a proportionate basis)
Impairment of goodwill(when NCI on fair value)
FOLLOWING IS THE CALCULATION OF IMPAIRMENT OF GOODWILL:
BOOK VALUE                                                  XXX
LESS(RECOVERABLE AMOUNT)               (XXX)
IMPAIRMENT LOSS of                                    XXX
Examples related to it will be discussed in upcoming blogs
WHEN NCI IS ON PROPORTIONATE BASIS
1)REDUCE CONSOLIDATED RETAINED EARNINGS(CRE)
2)REDUCE GOODWILL(IN NON-CURRENT ASSET)

WHEN NCI ON FAIR VALUE
If the NCI is recorded at fair value than the impairment loss on goodwill is apportioned between parent and NCI in proportion to their respective holdings.
1)REDUCE GOODWILL(IN NON-CURRENT ASSET (BALANCE SHEET)
2)REDUCE CRE
3)REDUCE NCI

Categories: CONSOLIDATION, IMPAIRMENT OF GOODWILL, NEGATIVEGOODWILL