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In your journey to analyze financial statements, you will need to understand the meaning of goodwill on the balance sheet.
Goodwill is an accounting term that stems from purchase accounting.
However, if ABC or XYZ sells to an external business entity, then those revenues are part of the consolidated income statement.
For example, if a company acquires 90 percent of a subsidiary at book value for 0,000, then the non-controlling interest is 10 percent, or ,000 [0,000 x (10 / 90)].
In this case, the consolidated balance sheet would show an investment in subsidiary account for 0,000 and a non-controlling interest amount of ,000.
When the pooling of interest method was used, the balance sheets of the two businesses were combined, and no goodwill was created.
When the purchase method was used, the acquiring company put the premium it paid for the other company on its balance sheet under the goodwill asset account.
Due to the old accounting rules, though, Hershey doesn't carry any goodwill for Reese's on the balance sheet.