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Session 3—100% Acquisition Accounting

Session 3—100% Acquisition Accounting. 100% acquisition accounting Investment analysis Consolidation entries Related expenses. Acquisition Method. Consideration equals fair value Consideration is greater than fair value Consideration is less than fair value (bargain purchase).

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Session 3—100% Acquisition Accounting

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  1. Session 3—100% Acquisition Accounting • 100% acquisition accounting • Investment analysis • Consolidation entries • Related expenses Advanced Accounting-2012

  2. Acquisition Method • Consideration equals fair value • Consideration is greater than fair value • Consideration is less than fair value (bargain purchase) Advanced Accounting-2012

  3. Acquisition Expenses • Indirect and direct expenses • Expense • Registration and issuance expenses • Deduct from P-Co APIC Advanced Accounting-2012

  4. Acquisition Process • Step 1: Review transaction & prepare investment analysis • Step 2: Record transaction on P Co. books • Step 3: Prepare Consolidation Worksheet • Step 4: Record Basic Elimination Entry (S) and Excess Asset Entry (A) • Step 5: Complete Consolidation Worksheet Advanced Accounting-2012

  5. Investment Analysis • Investment • Book value component • Excess over book value component • PV of contingent liability (Chapter 3) • Book value • Excess over book value • Assign to assets • Unassigned amount to goodwill • Do not record pre-existing goodwill • Investment less than book value • Record as gain on bargain purchase • See example pps. 52-55 Advanced Accounting-2012

  6. Other Issues • Eliminate acquired goodwill (do not include in the analysis) • Capitalize In-Process Research & Development (IPR&D) • Treat as indefinite-lived asset • Expense when R&D project is complete • Test Annually for impairment Advanced Accounting-2012

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