When a company purchases shares (equity) in another company, the investment amount may exceed their...
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Accounting
When a company purchases shares (equity) in another company, the investment amount may exceed their share of the book value of the underlying net assets of the investee. How does the investing company account for this excess amount under the equity method? I don't understand someone told me that it should be accounted as goodwill. But under the equity methods it means that the investing company owns only 20-50%. Why the excess amount should be accounted as goodwill? I thought goodwill should be accounted only when the company buys whole other company, not part of it???
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