The Goodwill of Associate

[Acid]

Hi

Do we account for goodwill of associates in our balance sheet?

[Acid]

Hi


Under the equity method , we keep increasing the investment in our associate by the amount of profit which we recieve ,isnt this misleading that once our original investment will keep increasing with the no of profits which we get , how will investors know the original amount of the investment?

For example If I invest $ 10000 in an associate and earn a profit of $ 2000. So in my consolidated balance sheet investment in associate will show a balance of $12000 hence changed...?


Thanks

Acid

[siddharth]

Hi Acid

No, we don’t account for Goodwill separately. It is already included in Investments in associates figure.

They can come to know about income from associates through comparative figures in Statement of financial position or it will be shown in statement of comprehensive income every year.

Your point is correct. But standards are prepared by many experts, So There must be some reasons behind this.

Even in my personal view, standard is misleading in another aspect. It doesn’t consider dividend received from associate also. For eg. We invest $10,000 in associate and our share of post earnings comes to $5,000, out of which we receive $1,000 as dividend. We show investment in associate as $15,000 ($10,000+$5,000). but according to me it should be $14,000 (10,000+5,000-1,000). Because we have already received it so we dont need to show as a liability. But again there must be reasons for this.

I think admin of this forum can clarify our doubts.

Regards