Non-Full Goodwill events
Initial consolidation – No Full Goodwill
This type of event is used for a new acquisition when the group does not apply the goodwill calculation method provided for in accounting standard IFRS 3 (Full Goodwill method).
The ownership structure register is fed as follows:
- The ownership percentage.
- The value of the financial investment when the acquisition took place.
- The acquired entity's net equity value.
When an event of this type occurs, a journal comprising the rows listed below is generated in the currency of the buyer entity:
- Financial investment elimination rows
- Net equity elimination rows
- Goodwill account indicated in the financial investment elimination logic from the ownership structure register. CCH Tagetik calculates the difference between the value of the financial investment and the sum of the net equity accounts present in the elimination and writes that value on the variation goodwill account using the incoming or incoming/outgoing variation as the reason. If no variations have been created for the goodwill account or the specific variation account has not been related to the process, the value is written on the normal goodwill account.
Step up consolidation - No Full goodwill
This type of event is used in case of the acquisition of an additional share in the net equity of an entity already belonging to the group, when the group does not apply the goodwill calculation method provided for in accounting standard IFRS 3 (Full Goodwill method).
The ownership structure register is fed as follows:
- The new ownership percentage.
- The financial investment when the new acquisition was made.
- The acquired entity's net equity value – before the new acquisition (normal accounts).
- The acquired entity's net equity entries that were made when the new acquisition took place (variation accounts).
When an event of this type occurs, a journal comprising the rows listed below is generated in the currency of the buyer entity:
- Financial investment elimination rows
- Net equity elimination rows. The variation accounts dedicated to the change in the consolidation scope that derives from the new ownership percentage are adjusted.
- Goodwill account indicated in the financial investment elimination logic from the ownership structure register. CCH Tagetik calculates the difference between the value of the financial investment and the sum of the net equity accounts present in the elimination and writes that value on the variation goodwill account using the incoming or incoming/outgoing variation as the reason. If no variations have been created for the goodwill account, or the variation account has not been related to the process, the value is written on the normal goodwill account.
Partial disposal – No Full goodwill
This type of event is used in case of the sale of a share in the ownership of an entity when the group does NOT calculate goodwill in accordance with accounting standard IFRS 3 (Full Goodwill method).
The ownership structure register is fed as follows:
- The new ownership percentage.
- The value of the decrease in the financial investment when the assignment is made.
- The sold entity's net equity value – amount prior to the assignment event (normal accounts);
- The sold entity's net equity entries that were made when the event occurred (variation accounts).
When an event of this type occurs, a journal comprising the rows listed below is generated in the currency of the buyer entity:
- Financial investment elimination rows
- Net equity elimination rows. The variation accounts dedicated to the change in the consolidation scope that derives from the new ownership percentage are adjusted.
- Goodwill account. CCH Tagetik defines the Goodwill account (Normal and Variation) by calculating the amount to be loaded. This amount is equal to the value of the Goodwill from the journal times the variance in the ownership percentage. In case of event journals, this calculation takes account of all the goodwill present in that relationship's elimination journals (preceding the event). The adjusted variation account is the account dedicated to changes in the ownership percentage (reductions). If no variations have been created for the goodwill account, or the variation account has not been related to the process, the system writes that value on the normal goodwill account.
- Capital gain/Capital loss account. The Capital gain/Capital loss account, specified in the financial investment elimination logics from the ownership structure register, is calculated by generating a balancing entry based on all the amounts on the financial investment, net equity and goodwill accounts within the journal. This entry is attributed to the seller entity.
- Profit reversal reserve account on consolidation journals. This is the consolidation journals loading account present in the reversals rule associated with the process. The same amount calculated for the capital gain/capital loss entry is written off from the reversed reserves of the seller entity and reallocated to the sold entity for the purposes of fair distribution.
Deconsolidation - No Full goodwill
This type of event is used in case of the sale of the entire shareholding in an entity when the group does NOT calculate goodwill in accordance with accounting standard IFRS 3 (Full Goodwill method).
The ownership structure register is fed as follows:
- The new ownership percentage (zero).
- The value of the decrease in the financial investment when the assignment is made (brought to zero).
- The sold entity's net equity value – amount prior to the assignment event (normal accounts).
- The sold entity's net equity entries that were made when the event occurred (variation accounts).
When an event of this type occurs, a journal comprising the rows listed below is generated in the currency of the buyer entity:
- Financial investment elimination rows, which write off the entire amount relative to the previous event.
- Net equity elimination rows. The variation accounts dedicated to the change in the consolidation scope that derives from the new ownership percentage are adjusted.
- Goodwill account. The system defines the Goodwill account (Normal and Variation) by calculating the amount to be loaded. This amount is equal to the value of the Goodwill from the journal times the variance in the ownership percentage. Given that the new percentage sets the previous value to zero, the loaded Goodwill corresponds to everything that the journal contains in relation to the previous event. The adjusted variation account is the account dedicated to changes in area (outgoing).
- Capital gain/Capital loss account. The Capital gain/Capital loss account, specified in the financial investment elimination logics from the ownership structure register, is calculated by generating a balancing entry based on all the amounts on the financial investment, net equity and goodwill accounts within the journal. This entry is attributed to the seller entity and also entails what was previously present in the journal being set to zero.
- Profit reversal reserve account on consolidation journals. This is the consolidation journals loading account present in the reversals rule associated with the process. The same amount calculated for the capital gain/capital loss entry is written off from the reversed reserves of the seller entity and reallocated to the sold entity for the purposes of fair distribution.
Given that this is a deconsolidation event, all entries generated by the system are intended to set the journal to zero.