Bartholomew Corporation acquired all of the outstanding shares of Samson Company

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

Bartholomew Corporation acquired all of the outstanding shares of Samson Company in Year 1 by paying $6,875,000 in cash

So purchase consideration = $ 6875000

The fair value of Samson’s identifiable net assets is $5,000,000.

So Net Assets = $ 5,000,000

A. What amount of goodwill should be reported from the acquisition of Samson under IFRS/GAAP?

Calculation for the value of Goodwill is as under

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?

Both IFRS and US GAAP Net Intangible Assets and Goodwill will recorded as follow
5000000-4750000 = 250000

Particular Amount in $ Purchase Consideration 6875000 Net identifiable assets 5000000 Goodwill 1875000

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