What is the difference between the full-goodwill and partial-goodwill methods under IFRS 3, and which is more commonly used?
A core Group Accounting interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
The choice (made per business combination under IFRS 3) is how you measure NCI at acquisition, which changes goodwill. Full goodwill: NCI is measured at its acquisition-date fair value, so recognized goodwill includes the NCI's share — goodwill and NCI are higher. Partial goodwill: NCI is measured at its proportionate share of the acquiree's identifiable net assets, so goodwill reflects only the parent's share — lower goodwill, no goodwill on the NCI. IFRS 3 permits EITHER, deal by deal; US GAAP requires full goodwill. In IFRS-Europe practice the partial-goodwill method is in fact the more common choice. IAS 36 does NOT require full goodwill — it explicitly provides a notional gross-up of goodwill when testing a partially-owned CGU precisely because partial goodwill is allowed. The method affects the size of goodwill, NCI, and the impairment mechanics.
WHAT INTERVIEWERS LISTEN FOR
- ✓Choice = how NCI is measured at acquisition (per deal under IFRS)
- ✓Full: NCI at fair value → goodwill includes NCI share (higher)
- ✓Partial: NCI at proportionate net assets → only parent's goodwill (lower); common in IFRS-Europe
- ✓US GAAP requires full; IAS 36 does NOT require full (uses a gross-up for partial)
COMMON MISTAKES
- ✗Claiming IAS 36 requires the full-goodwill method
- ✗Saying partial goodwill is prohibited under IFRS
- ✗Not linking the methods to NCI measurement
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RELATED QUESTIONS
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