On 1 July 2019 Debbie Ltd acquired a 100% interest in Stefan Ltd. At that date Stefan Ltd had goodwill of $6 000 recorded in its statement of financial position as a result of a previous business combination. The total goodwill arising on Debbie's acquisition of Stefan was $16 000. The goodwill to be recognised on consolidation as a result of Debbie's acquisition of Stefan is:
A) nil.
B) $6 000.
C) $7 000.
D) $10 000.

Question

Quizplus · Accepted Answer

Goodwill on consolidation is calculated based on the acquisition date values and does not take into account previously recorded goodwill in the acquiree's financial statements. Therefore, the entire $16,000 goodwill arising from Debbie's acquisition of Stefan is recognized, not just the incremental difference or the previously recorded amount.

On 1 July 2019 Debbie Ltd Acquired a 100% Interest