On 1 June 2013, Sun Ltd acquired 75% interest (and control) over Savy Ltd by acquiring 570 000 of the issued ordinary shares of Savy Ltd. The consideration paid was settled in cash amounting to R810 000. On this date the retained earnings of Savy Ltd amounted to R125 000 and 760 000 ordinary shares worth R950 000.
The Sun Ltd Group measures non-controlling interests in an acquiree at its proportional share of the aquiree's identifiable
I net assets at acquisition date (partial goodwill method).
On 31 December 2015, goodwill was tested for impairment and it was determined by the directors of Sun Ltd that the goodwill was impaired with R2 750 at the end of the current financial year.
The amount that will be disclosed as goodwill in the consolidated statement of financial position of the Sun Ltd
Group as at 31 December 2015, is.
Select one:
O a. R269 750
O b. RNIL O c. R3 750
AD)
Co
d. R1 000
The correct answer is b. R0 (RNIL).
Goodwill is the difference between the consideration paid for the acquisition of a subsidiary and the fair value of its identifiable net assets at the acquisition date. In this case, the consideration paid by Sun Ltd for the acquisition of Savy Ltd was R810,000 and the identifiable net assets of Savy Ltd at the acquisition date were R950,000.
The calculation of goodwill is as follows:
Consideration paid for acquisition - Identifiable net assets at acquisition date
= R810,000 - R950,000
= -R140,000
Since the calculated goodwill is a negative amount, it means that there is impairment of goodwill. Therefore, the amount that will be disclosed as goodwill in the consolidated statement of financial position of the Sun Ltd Group as at 31 December 2015, is R0 (RNIL).