Basically this question asks if the RETURN on EQUITY will be the same under: -Equity method -Consolidation w/ full goodwill -Consolidation w/ partial goodwill (note that some goodwill was purchased - this is amortized over the next 6 years) Choices: A) Same under consolidations, but different from Equity B) All Same C) None Same ROE = NI / Equity Obviously Equity is different under consolidation (include minority interest) and the equity method. They use this to claim the answer is A. However, I think the answer should be C - because the goodwill will be different under full and partial methods - that means the amortization expense will be different - so NET INCOME will be different. Anyone else come across this BS? Or am I just totally wrong. They even mentioned how the amortization expense would be different in question #27 as well!!!
Goodwill is not amortized ,it is tested for impairment.
Correction - the goodwill was apparently attributed to “previously unrecorded liscences, which have an economic life of 6 years”. So in effect there was NO real goodwill, it was just assets they never knew they had. This is kind of BS if you ask me. So in affect there is no goodwill here at all, yet half the questions have “full” or “partial” as answers (which explains why neither of them are ever answers. BS CFA.