Hello and thanks in advance,
I am very confused regarding a few examples in the CFA books regarding the calculation of goodwill under the acquistion method. In the example on page 142, we first calculate excess purchase price. Excess purchase price is then allocated to the different between fair value and book value of the company being acquired. The remainder is goodwill.
When we move onto the example for Non-controlling asset valuation as is the case with an acquistion (when the entire company is not acquired), the entire excess price is recorded as goodwill and is not first allocated to the different between fair value and book value of the company being acquired.
Can anybody explain this to me? Much appreciated!