In accounting concepts, goodwill means that the value of an entity over and above the value of the entitys

assets. There are two goodwill methods: partial and full goodwill methods. Full goodwill method assumes that the entity has acquired a majority stake in a subsidiary and will obtain all the benefits; therefore the consolidated balance sheet will show the calculation of goodwill on the whole subsidiary. On the other hand, partial goodwill represents that there is only a required portion of goodwill needing to be calculated (Cote D., May 2012). As an entity, it is possible to choose either partial or full goodwill method, which depends on the entitys requirement. To calculate partial goodwill, 100% of assets and liabilities will be recognized and the entity only measures the goodwill associated with the controlling interest. Partial goodwill is identified at the total values of the consideration transferred, fair value of the parents previous equity interest in the subsidiary at the efficient purchase date of the assets, and the value of an non-controlling interest in the subsidiary that recognized non-controlling interests share of the subsidiarys net assets less the value of the total assets and liabilities of the subsidiary at the efficient date of purchase. All these values are measured according to AASB (PwCs IFRS Manual of Accounting 2011). In this case, if the parent uses partial goodwill method, the value of goodwill would be: To calculate full goodwill, the entity concludes the total value of identifiable liabilities and assets that has been required, which also includes good will. To recognize the full goodwill, first of all, gather the total value of the consideration transferred, fair value of all noncontrolling interest and the previous equity interest that has held by the entity at the efficient purchase date less the net value of all recognizable assets and liabilities (A Global Guide to Accounting for

business combinations and NICs 2010). By using full goodwill method, the amount of goodwill is:

In comparison, Before making the decision of which method should be used in calculating goodwill, there are several differences between using partial and full goodwill method: the assumption is that the carrying amount is less than the consideration paid for the purchase of the non-controlling interest. By using partial goodwill method, the value of net assets and equity would be lower at the time of combination, but the value would be higher by using full goodwill method. Entitys share of equity would reduce more if the NCI is acquired after the combination of the business by partial good method, and it would decrease less by full goodwill method. The last fact is if the entity uses partial goodwill method, goodwill impairment would be smaller and it is shown in the income statement. On the other hand, by using full goodwill method, impairment would be higher. Under full goodwill method, the impact on the result of net profit after impairment is greater than partial goodwill method. Moreover, there are no effects on the frequency of goodwill impairments by using different method of calculating NCI (Understanding the accounting for goodwill in a business combination). Reference: Cote D., full vs. Partial good will, non-controlling interest equity method, 02 May 2012. URL: http://www.analystforum.com/forums/cfa-forums/cfa-level-iiforum/91310893 PwCs IFRS Manual of Accounting 2011, P22.257-25.260, June 2011 A Global Guide to Accounting for business combinations and NICs 2010 (US GAAP & IFRS) P7.2, 2010

Understanding the accounting for goodwill in a business combination, Goodwill- An example of puzzle-solving, Abacus, Vol. 24, No1, 1988