What is Goodwill on Acquisition?
Goodwill on acquisition is the excess of the consideration transferred over the fair value of the net identifiable assets acquired in a business combination. Under IFRS 3, goodwill is recognized as an intangible asset on the consolidated balance sheet and tested for impairment annually under IAS 36.
How It Works
- Determine the fair value of consideration, non-controlling interest and any previously held equity interest.
- Determine fair value of net identifiable assets acquired.
- Recognize the positive difference as goodwill.
- Test annually for impairment at the cash-generating unit level.
Saudi Context
Saudi listed acquirers with material goodwill balances disclose impairment testing assumptions in detail, including discount rate, growth rate and key forecast inputs.
Example
Consideration paid SAR 600 million; fair value of net identifiable assets SAR 480 million. Goodwill recognized is SAR 120 million.