What is the precise goodwill calculation formula including NCI treatment?

Q: What is the precise goodwill calculation formula including NCI treatment?

**Goodwill formula:**\n\nGoodwill = (Consideration transferred + NCI + Fair value of previously held equity) − Fair value of identifiable net assets\n\n**Two methods for NCI (IFRS election per transaction; US GAAP requires full):**\n\n**1. Full goodwill method** (mandatory US GAAP, optional IFRS):\nNCI = NCI % × Fair value of target as a whole\n\n**2. Partial goodwill method** (IFRS only):\nNCI = NCI % × Fair value of identifiable net assets\n\n**Example — Galapagos Media acquires 75% of Summerfield Studios for $450M:**\n- Fair value of 100% of target (implied): $600M\n- Fair value of identifiable net assets: $380M\n\n*Full goodwill:*\n- NCI = 25% × $600M = $150M\n- Total consideration + NCI = $450M + $150M = $600M\n- Goodwill = $600M − $380M = **$220M**\n\n*Partial goodwill (IFRS):*\n- NCI = 25% × $380M = $95M\n- Total = $450M + $95M = $545M\n- Goodwill = $545M − $380M = **$165M**\n\nDifference of $55M = 25% × $220M (NCI share of goodwill). Full method gives higher assets and higher NCI but identical net income attributable to parent.\n\n**Step acquisitions:** If acquirer previously held 20% equity interest, remeasure that stake to fair value at acquisition date and recognize gain/loss in P&L, then include remeasured amount in consideration.

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AcadiFi · Accepted Answer

**Goodwill formula:**

Goodwill = (Consideration transferred + NCI + Fair value of previously held equity) − Fair value of identifiable net assets

**Two methods for NCI (IFRS election per transaction; US GAAP requires full):**

**1. Full goodwill method** (mandatory US GAAP, optional IFRS):
NCI = NCI % × Fair value of target as a whole

**2. Partial goodwill method** (IFRS only):
NCI = NCI % × Fair value of identifiable net assets

**Example — Galapagos Media acquires 75% of Summerfield Studios for $450M:**
- Fair value of 100% of target (implied): $600M
- Fair value of identifiable net assets: $380M

*Full goodwill:*
- NCI = 25% × $600M = $150M
- Total consideration + NCI = $450M + $150M = $600M
- Goodwill = $600M − $380M = **$220M**

*Partial goodwill (IFRS):*
- NCI = 25% × $380M = $95M
- Total = $450M + $95M = $545M
- Goodwill = $545M − $380M = **$165M**

Difference of $55M = 25% × $220M (NCI share of goodwill). Full method gives higher assets and higher NCI but identical net income attributable to parent.

**Step acquisitions:** If acquirer previously held 20% equity interest, remeasure that stake to fair value at acquisition date and recognize gain/loss in P&L, then include remeasured amount in consideration.

What is the precise goodwill calculation formula including NCI treatment?

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