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

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Presentation on theme: "Advanced Accounting-2012 3-1 Session 3—100% Acquisition Accounting n 100% acquisition accounting n Investment analysis n Consolidation entries n Related."— Presentation transcript:

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

2 Advanced Accounting-2012 3-2 Acquisition Method n Consideration equals fair value n Consideration is greater than fair value n Consideration is less than fair value (bargain purchase)

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

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

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

6 Advanced Accounting-2012 3-6 Other Issues n Eliminate acquired goodwill (do not include in the analysis) n Capitalize In-Process Research & Development (IPR&D) n Treat as indefinite-lived asset n Expense when R&D project is complete n Test Annually for impairment

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