If I remember correctly, WES are carrying a substantial amount of Goodwill from the Coles transaction on their books.
Although I don't know for sure, I imagine the goodwill remains there.
What happens to that goodwill component after Coles is demerged from the group ??
Does it remain with WES ??"
@Jako8557,
Ah, the arcane alchemy of demerger accounting....
The Coles acquisition goodwill both does, and at the same time does not, remain with WES.
To explain, in as simple terms as I can:
When the Coles entity is demerged, there are certain tax implications.
In essence, depending on the terms of the demerger, an assessed value of the Coles business is made in the eyes of the ATO.
Included in that assessment by the ATO, and the possible tax implications that might flow from it, is what WES paid for Coles (including the goodwill, obviously).
So the goodwill forms part of WES's cost base for the business.
Then, when it is demerged, the clever accountants at WES will basically argue the following: "Mr Tax Man/Lady, because we are not selling Coles,
per se, but are merely transferring it to existing shareholders, there is no capital gain event triggered, so there is no capital gains being realised so we would like to pay no tax."
If the Tax Man/Lady agrees (which he/she will), then the assets and liabilities that belong to Coles (not the goodwill that arose when WES bought Coles... that has nothing to do with the Coles entity's financials) get transferred off WES's balance sheet, and onto the balance sheet of de-merged Coles.
And so, in the process, the acquisition goodwill - just as easily as it appeared out of thin air when WES acquired Coles - disappears back into thin air as part of the Coles "sale value" when WES "sells" Coles.
At least, that's how my limited metal capacity understands it.
But I have to admit not having spent too much time on this, because it is all of a non-cash nature (and is therefore valuation irrelevant), being little more than one of the accounting world's many idiosyncrasies that might get CA's salivating in animated conversation, but which have no impact on us that live in the real world.
