India Enterprises has four divisions.It acquired one of them, Bombay Products, on January 1, 2011 for Rs400,000,000, and recorded goodwill of Rs50,750,000 as a result of that purchase.At December 31, 2011, Bombay products had a recoverable amount of Rs370,000,000.The carrying value of the company's net assets at December 31, 2011 was Rs355,000,000 (including goodwill).What amount of loss on impairment of goodwill should India record in 2011?

Question

Quizplus · Accepted Answer

The impairment loss is calculated as the carrying value of the net assets (including goodwill) minus the recoverable amount. Here, Rs355,000,000 - Rs370,000,000 = Rs0, indicating no impairment. However, since the recoverable amount is less than the acquisition cost, the goodwill impairment is Rs50,750,000 - (Rs370,000,000 - Rs355,000,000) = Rs15,000,000.

India Enterprises Has Four Divisions