Bartholomew Corporation acquired all of the outstanding shares of Samson Company
ID: 2416699 • Letter: B
Question
Bartholomew Corporation acquired all of the outstanding shares of Samson Company in Year 1 by paying $6,875,000 in cash. The fair value of Samson’s identifiable net assets is $5,000,000. Samson is a separate cash-generating unit and reporting unit. At the end of Year 1, Bartholomew compiles the following information for Samson:
Amount at which the shares of Samson could be sold ……………………. $5,000,000
Fair value of Samson’s identifiable net assets excluding goodwill ………. $4,500,000
Costs that would be incurred to sell the shares of Samson ………………... $ 200,000
Present value of future cash flows from continuing to control Samson ….. $4,750,000
A. What amount of goodwill should be reported from the acquisition of Samson under IFRS/GAAP?
B. At what amount should Samson’s identifiable net assets and goodwill be reported on Bartholomew’s consolidated balance sheet at the end of Year 1 under U.S. GAAP and IFRS?
Explanation / Answer
A
As per GAAP:
At the acquisition of Samson the goowill is reported as the excess of purchase consideration over the fair value of identifiable net assets. the purchase consideration is $6,875,000 and the fair value of identifiable net assets is $4,500,000.
the goodwill to be reported = $6,875,000-$4,500,000
=$2,375,000
As per IFRS the amount of goodwill is as under:
Consideration transferred =$6,875,000
Less: identifiable net assets=$4.500,000
Goodwill = $2,375,000
B.
Under GAAPand IFRS:
At the end of year 1 the net assets of Samsons will be reported at their fair values in the books of Bartholomew. The goodwill of $2,375,000 wll be reported at the end of year 1 in the books of Bartholomew.
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