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Financial reporting- goodwill question

512 views 1 replies

Shruti

CA Student

178 Points Joined May 2013

Hey, I had a query in Valuation of Goodwill if someone could resolve it than I would be really thankful.. Ques- When to calculate Average Capital Employed?? According to Praveen Sharma Sir, if one year information is given:- 1) FMP is calculated by weighted average then calculate Closing capital employed. 2) FMP is calculated on simple average method then calculate Avg capital employed. I want to confirm this as in in PM different solution is given..

Replies (1)

shriram

CA in Practice

86 Points Joined December 2008

FMP calculation is as simple as past year's average (which is expected to repeat in future). You need not worry about Capital employed in that.

But to find out Industry expected return => you may have to use Closing Capital employed x Industry return % (ICAI has suggested the closing capital employed always and has given the avg CE as an alternative answer). In my view, closing CE sums up everything

K Shriram, FCA