Example of Goodwill with NCI

Example of Goodwill with NCI

The goodwill in case of partial acquisition is calculated as under

Cost of investment

Add: Non Controlling Interest

Less: Fair value of Net Assets

Cost of investment and non controlling interest is added and fair value of net asset at acquisition date is deducted to calculate the Goodwill.

Example

Peen & Co purchased 60,000 Share	$ 400,000
Total shares of Sheen & Co	100,000
Net asset of Sheen & Co	$ 500,000

Solution

There are two steps of calculating the Goodwill i.e. first is to calculate the NCI and then Goodwill.

1.       Calculate NCI

% of Shareholding by NCI	40%
Net Assets	$ 500,000
NCI as proportion to  net Assets	$ 200,000

2.       Calculate Goodwill

Cost of Investment	$ 400,000
NCI	$ 200,000
Less: Net Asset Fair value	$ 500,000
Goodwill	$ 100,000