USA Goodwill

[Stephanie8906]

Our company was purchased in February. The parent company asked today for me to record an entry to an accrued expenses for employee cost and goodwill. If I remember correctly - good will could only be recorded on the parent (purchasing company books). Since we are the subsidiary wouldn't that need to go to Contributed capital on the subsidiary's books instead of good will

 

[Steve-LevelUp]

Hi Stephanie

You are correct. The parent would record the goodwill. On the parent balance sheet, the purchase entry would have been Dr. Investment, Cr. Cash.

Upon consolidation of the financial statements, the Net Assets is offset with the Investment, with the remainder going to goodwill.

Do you intend to maintain two separate set of books, or are the books going to be amalgamated?

It is possible that it will be the latter, which essentially means that net assets (& liabilities) will be absorbed by the parent. Essentially, it is distributing the Investment, among the different categories. The balance, to eliminate the investment account, would be the entry to goodwill.

Not sure if that helps, but this is what we have done in the past.

I would confer with the controller of the parent company and ask about this consolidation process as it might help to clarify the entry. If she still wants you to record the entry, then try to walk through with her what the entry would be. It should then dawn on her that the entry isn't correct.

Regards
Steve