I am a bit confused with full & partial goodwill, but if I understand well the logic behind the two concepts:

Full goodwill assumes that the company having acquired a majority stake (controlling stake) in a subsidiary will “reap all the benefits” and thus the consolidated BS will show the goodwill calculated on the whole subsidiary.

Partial goodwill states that goodwill can be calculated only on the portion acquired, since only this part of the company got reevaluated through the acquisiton price.

Am I right?

BTW, taking example 9 from the CFA book (p 154-156) and assuming that

the rest (10%) of the subsidiary has been purchased on the same date for 20k $

this investment qualifies for Investment in associates and thus will be treated with the Equity method by the minority shareholder

If I calculate goodwill on the remaining 10% with the equity method, I get a goodwill of 4k , consistent with the fact that the difference between full and partial goodwill is 40k - 36k = 4k . That also means that if the majority shareholder uses the full goodwill method, there will be a total of 44k $ recognized as goodwill. Is that correct?

Now concerning the noncontrolling interest: _ is there ANY relationship between the noncontrolling interest income or balance sheet figure and what the minority shareholder would present on its income statement/balance sheet under the equity method? _ I am afraid I miss the link.

This confused me too but I just reviewed the concept and it seemed to help. When you’re calculating full goodwill, think of it as FV of the target minus the FV of the target’s indentifiable net assets. Partial good will is the purchase price minus the pro-rata fair value of the target’s identifiable net assets. I like to think of it as P artial goodwill, P ro-rata FV of assets. P and P (it helps me). Some key formulas:

Partial goodwill (IFRS only): FV of subsidiary’s net assets * NCI%

Full goodwill: (GAAP & IFRS): FV of subsidiary * NCI%.

So in this example, for the full goodwill method, if the fair value of the subsidiary’s shares was 200,000. Goodwill is the FV of subsidiary - identifiable net assets (200-160) = 40. The non-controlling interest was 10%, so the value of noncontrolling interest is 20,000. Since we’re starting with the fair value of the subsidiary (whole value), this helps me to remember that this is Full goodwill.

For the partial goodwill method, the purchase price is 180,000 - fair value of net assets * stake = 180,000 - 160,000(.90) = 36,000. The noncontrolling interest is 160,000*.10= 16000.

I was told to not worry about what the minority shareholder holds on its B/S. The minority interest will only be shown as a line item on the acquirer’s B/S.

There are different calculations for minority interest, which form a part of equity, under partial and full goodwill method. So, equity will be different unless the fair value of the subsidiary is equal to the fair value of the subsidiary’s identifiable net assets.