When Hydra Ltd acquired the shares of Draco Ltd one
When Hydra Ltd. acquired the shares of Draco Ltd., one of the assets in Draco’s statement of financial position was $15,000 goodwill, which had been recognized by Draco upon its acquisition of a business from Valhalla Ltd.
Having prepared the acquisition analysis when preparing the consolidated financial statements for Hydra, the group accountant has asked for your opinion.
Provide advice on the following issues:
(a) How does the recording of goodwill by the subsidiary affect the accounting for the group’s goodwill?
(b) If, in subsequent years, goodwill is impaired, for example by $10,000, should the impairment loss be recognized in the books and records of Hydra or as a consolidation adjustment?
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