Hi all,
Need some help.
It is not really clear to me how does BCS take into account (equity-method)goodwill, and further more - amortization of goodwill, in/after Method Change activity.
Business scenario
Step 1.
Company "A" (equity - 1000 monetary units) is consolidated using equity method (25%) since Q4/2005 (parent company invested 4000 monetary units).
Step 2.
At the end of Q4/2006 method change takes place, equity to purchase (25% --> 51%).
Step 3.
At the end Q4/2007 parent company increases its ownership in company "A" (51% --> 60%).
Customizing
- COI method "METH1" utilizes equity method as an accounting technique. Acquisitions - group shares. Extraordinary amortization of goodwill
- COI method "METH2" utilizes purchase method as an accounting technique. Acquisitions - group shares. Ordinary amortization of goodwill, starting next Q, during 20 years.
Expected behavior
Step 1.
Equity-method goodwill arises (3750 monetary units).
Step 2.
"New" goodwill arises (3910 monetary units) from 26% (25% --> 51%).
Method changes from "METH1" to "METH2".
Next Q (Q1/2007) goodwill (3750 + 3910) is amortized - 95,75 (over 20 years, per Q).
Step 3.
"New" goodwill arises from 9% (51% --> 60%) and amortized next Q.
"Previous" is amortized.
Reality bites...
Step 1.
Equity-method goodwill arises (3750 monetary units).
Step 2.
"New" goodwill arises (3910 monetary units) from 26% (25% --> 51%).
Method changes from "METH1" to "METH2".
Next Q (Q1/2007) goodwill remains the same - goowdwill is not amortized.
Step 3.
"New" goodwill arises from 9% (51% --> 60%).
Only the newly arised goodwill (9%) is amortized next Q.
"Previous" is still not amortized.
Is it "standard" behavior?
What causes the difference in Steps 2 and 3?
Thanks in advance.