Goodwill and non-controlling interests (Appendix C)

Learning objectives

• Calculate the notional gross-up of goodwill when non-controlling interests are measured at their proportionate share of net assets, then the impairment loss recognised.L3, L4
• Explain the allocation of the loss between the parent and the non-controlling interests and why no loss is recognised on the notional goodwill.L3, L4

Normative references

• IAS 36 §C1Notes that, under IFRS 3 (as revised in 2008), goodwill is measured at the acquisition date as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest and the fair value of any previously held equity interest over the net of the identifiable assets acquired and the liabilities assumed.
• IAS 36 §C2Specifies that the allocation of goodwill to CGUs follows paragraphs 80 onwards, including for the portion relating to CGUs with no non-controlling interest.
• IAS 36Notes that the impairment test consists of comparing the recoverable amount of a CGU with its carrying amount.
• IAS 36 §C4When non-controlling interests are measured at their proportionate share of net assets, the carrying amount of the goodwill of the CGU is notionally grossed up to include the goodwill attributable to the non-controlling interests before being compared with the recoverable amount.
• IAS 36 §C5Opens the section on allocating the impairment loss: notes that, in accordance with paragraph 104, the loss recognised for the CGU reduces first the goodwill allocated to it, then the other assets of the unit pro rata on the basis of their carrying amounts.
• IAS 36 §C6If a subsidiary (or part of a subsidiary) with a non-controlling interest is itself a CGU, the impairment loss is allocated between the parent and the non-controlling interest on the same basis as that on which profit or loss is allocated.
• IAS 36 §C7If the subsidiary is part of a larger CGU, the goodwill impairment loss is allocated between the parts with and without a non-controlling interest on the basis of relative values (goodwill, then identifiable net assets) before the impairment.
• IAS 36 §C8The impairment loss relating to the notional goodwill of the non-controlling interests, which is not recognised in the consolidated financial statements, is not recognised; only the portion relating to the recognised goodwill is recognised.
• IAS 36 §C9Refers to the Illustrative Examples (series 7) for the application of these requirements.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

9 questions

• Belmonte holds 70% of a subsidiary that is a CGU. Non-controlling interests were measured at their proportionate share of identifiable net assets, so that the goodwill recognised relates only to the parent's share. Which carrying amount of the CGU must be compared with its recoverable amount?L3
• Calvène holds {ownership} of its subsidiary Rozel, which is a CGU. Non-controlling interests were measured at their proportionate share of identifiable net assets. At the year-end, the goodwill recognised amounts to {goodwill_recognised} and the carrying amount of Rozel's identifiable net assets to {net_assets}. The recoverable amount of the CGU is {recoverable_amount}. For the notional gross-up, the group extrapolates goodwill in proportion to the ownership percentage (given). Compute the grossed-up carrying amount of the CGU and the impairment loss recognised.L3
• The Estérel group acquired {ownership} of Mirabel, which on its own forms a CGU; minority interests were measured at the proportionate share of identifiable net assets. The goodwill in the consolidated statement of financial position is {goodwill_recognised}, Mirabel's identifiable net assets are carried at {net_assets} and the recoverable amount of the unit is estimated at {recoverable_amount}. Notional goodwill is obtained by extrapolating goodwill in proportion to the ownership percentage (given). No individual floor is binding (given). Determine the loss recognised on goodwill, the loss allocated to the other assets and the total loss recognised.L4
• Corbières holds {ownership} of its subsidiary Taurac, which on its own is a CGU. Non-controlling interests were measured at fair value under IFRS 3 (given): the goodwill recognised already includes their share and no notional gross-up is needed. Taurac's profit or loss is allocated in proportion to ownership percentages. The carrying amount of the CGU, including goodwill, is {carrying_amount} and its recoverable amount is {recoverable_amount}. Allocate the impairment loss between the parent and the non-controlling interests.L3
• The Arvieux group controls the Solenne clinic, of which it owns {ownership} of the share capital; the clinic forms a separate CGU. Non-controlling interests, measured at fair value at acquisition (given), are therefore already included in the goodwill recognised. The shareholders' agreement provides for profit to be shared in proportion to the capital held. At the test date, the unit is carried at {carrying_amount}, including goodwill, while its recoverable amount is only {recoverable_amount}. What share of the loss goes to the group, and what share to the non-controlling interests?L4
• The Network CGU of the Maubert group combines a wholly owned operation and the subsidiary Ondine, whose non-controlling interests were measured at fair value (no notional gross-up is needed). Before impairment, the CGU's goodwill relates to the wholly owned operation for {goodwill_wholly_owned} and to Ondine for {goodwill_subsidiary}. The test shows a loss of {goodwill_loss}, charged entirely to goodwill. Allocate this loss between the part without and the part with non-controlling interests.L4
• Peyrac holds 90% of its subsidiary Velay, which is a CGU; non-controlling interests were measured at the proportionate share of net assets. The goodwill recognised is 270,000, which corresponds, by extrapolation to the ownership percentage (given), to total goodwill of 300,000. Velay's identifiable net assets have a carrying amount of 1,200,000 and the recoverable amount of the unit is 1,380,000. The controller proposes recognising a loss of 120,000. What loss must be recognised?L4
• The Hautvent group has two 75%-owned subsidiaries, each forming a CGU. For the subsidiary Lys, non-controlling interests were measured at their proportionate share of identifiable net assets; for the subsidiary Iris, they were measured at fair value. For which of these CGUs must goodwill be notionally grossed up before the impairment test?L3
• The subsidiary Brasque, 75% owned by Ourcq, is on its own a CGU; its non-controlling interests were measured at fair value. This year's test shows an impairment loss. On what basis is the loss allocated between the parent and the non-controlling interests?L3