Question

Describe the presentation of the consolidated balance sheet and income statement indicating a) The inclusion of goodwill and gain on acquisition b) Disclosures necessary to the financial statements. c) The impairment of goodwill.

Answer 1

A. The core principles as per US GAAP are that an acquirer measures the cost of the acquisition at the fair value of the consideration paid; allocates that cost to the acquired identifiable assets and liabilities on the basis of their fair values; allocates the rest of the cost to goodwill; and recognises any excess of acquired assets and liabilities over the consideration paid (a ‘bargain purchase’) in profit or loss immediately. The acquirer discloses information that enables users to evaluate the nature and financial effects of the acquisition.

B. Entity need to provide sufficient disclosure regarding interest of the parent and non controlling owners. It also required disclosure of the amounts of consolidated net income attributable to the non controlling interest and parent.

C. Every year Goodwill is tested for impairment and and for every impairment , a reduced amount is shown on consolidated balance sheet and impairment is charged to income statement.