Equity Method vs. Partial vs. Full Good Will Consolidation

[atsong09]

Hi,
I was wondering how shareholder equity differs based on the different accounting treatment-specifically using: the equity method, partial goodwill consolidation, and full good will consolidation.
Is anything added into equity if the equity method is used? Also it was my understanding that equity will be higher if full goodwill consolidation used versus partial goodwill consolidation?
However, the Intercorporate Investment EOC Question 29 has the following answer:

1. A is correct. Net income is the same using any of the choices. Beginning equity under the equity method is £1,430. Under either of the consolidations, beginning equity is £1,750 since it includes the £320 noncontrolling interest. Return on beginning equity is highest under the equity method.

Thanks in advance for the help!

 

[Gebura]

Under equity method nothing is added to equity (except of course your share of NI through Retained earnings).
Under full goodwill consolidation equity is higher.
In Q 29 there is no goodwill so both partial and full goodwill result in same figure for equity.

 

[atsong09]

Thanks for the help! Just a quick question. how do you know there is no goodwill in Q29?

 

[Gebura]

In the text it’s stated- “the excess of the purchase price over the fair value…was attributable to previously unrecorded licenses.”

 

[atsong09]

Ok that makes sense, I think I’m getting goodwill confused with other intangible assets. Thanks for clarifying!