Reading 19 Q5 understand, question, correct

justin88

Hi,
Specifically to this question, I understand full/partial goodwill methods affect sharesholders equity, but from the answer, ‘shareholers’ equity wll be higher under full goodwill”.  Is it always the case? I dont’ know this is an easy or hard question, but it seems a strange one to me, can anyone please explain how you arrive to the correct answer (C)?  Thanks in advance!

gjcxc

Yes, it is. When partial goodwill method is used, then minority interest is just part of total net assets of subsidiary. When full goodwill, MI has its part of goodwill additionally to its part of NA. As minority interest is placed in shareholder’s equity part of FS, it’s going to be bigger under full goodwill method, as compared to partial goodwill method, assuming there is positive goodwill on acquizition.
Hope it helps)

meghanjackson

Thanks for the explanations!

mouse123

Nanny wrote:
Yes, it is. When partial goodwill method is used, then minority interest is just part of total net assets of subsidiary. When full goodwill, MI has its part of goodwill additionally to its part of NA. As minority interest is placed in shareholder’s equity part of FS, it’s going to be bigger under full goodwill method, as compared to partial goodwill method, assuming there is positive goodwill on acquizition.
Hope it helps)
Good explanation. This stuff gets tricky - especially after a gap of a week or more.