• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Negative Goodwill

P

Purnesh Kumrawat

Member
How to show negative Goodwill for this example?
Cb 1 cmp page no. 7 of chapter 13
 
Last edited by a moderator:
Negative goodwill is a very unusual situation in practice. It happens when Company A buys Company B for less than the net asset value shown in Company B's accounts. Assets in Company B's accounts would have been revalued at the point of the goodwill calculation, so the low price paid by Company A cannot be explained by saying that the assets owned by Company B are simply undervalued in the accounts. Usually it is a distressed sale, and Company B is being bought for a knock-down price.
In most circumstances the negative goodwill can be treated as a profit in Company A's consolidated income statement. In the consolidated accounts it would boost the retained profits (referred to more generally as "other reserves" in the course note text).
 
You must log in or register to reply here.
Back
Top