Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements.
Goodwill is determined as the excess (i) of the consideration paid; (ii) of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired at the date of acquisition. All business combinations are accounted for by applying the purchase method.
In conformity with IFRS
3
Business Combinations
, goodwill is carried at cost and is
not
amortized, but tested for impairment at least annually, or whenever there are indications that the cash generating unit to which the goodwill has been allocated
may
be impaired. Impairment losses recognized on goodwill are
not
reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is expressed in the functional currency of the subsidiary or joint operation to which it relates and translated to
Reais
using the year-end exchange rate.
Regarding associates and joint ventures, goodwill is included in the carrying amount of the investment in the associate/joint ventures.
If the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination such excess is recognized immediately in the income statement.
Expenditure on internally generated goodwill is expensed as incurred.
Goodwill includes the effects of the predecessor basis of accounting (Note
3
(c)).
