ABC Ltd$.$ acquired $70\%$ of the shares in XYZ Ltd$.$ on $31$ December $2019$ for a cost of $4,000,000.$ The profit and loss accounts for the year ended $31$ December $2020$ are as follows:

$4.-$ACR$\_$MG$2.$png Additional information:

A goodwill impairment review has been carried out, and it has been determined that goodwill has been impaired by $300,000$ as at $31$ December $2020.$

Required:

Define what is meant by purchased goodwill, how it is calculated, and explain the reasons why it might arise.

Prepare the consolidated profit and loss account for the Group for the year ended $31$ December $2020.$

Outline the goodwill impairment review process and examine the current criticisms of its practical implementation.

Profit & Loss Account

Year ended $31$ December $2020$