Goodwill ImpairmentNon Controlling Goodwill Not Recorded

Facts

•B purch 80% pf S for $5.5 million

•FV of S net assets were $5 million

•After one year 80% can be sold for $4.8 million after selling costs

•Value in use of 80% of S is $4.75 million

What’s The Goodwill Worth?

AT PURCHASE:

•Company is worth $6.875 million

•Net assets are worth $5 million

•Total goodwill = $1.875 million

Controlling vs Non Controlling Shares

$4,000,000

$1,000,000

FV Net Assets

$5,500,000

$1,375,000

FV of S

CREDIT

CREDIT

$1,500,000

$375,000

Goodwill

DEBIT

NON CONTROLLING GOODWILL IS NOT ON

THE BOOKS

1 YEAR LATER – IMPAIRMENT TEST

GOODWILL IS IMPAIRED

ALLOCATION

1,500,000

200,000 1.4 1.2

Sales

GOODWILL NET ASSETS

NO RECOVERIES OF GOODWILL