Question: Assume that Your Company acquires My Company in a business

Assume that Your Company acquires My Company in a business combination. My Company has a patent for its production process. Search the FASB ASC data-base to enable you to answer the following questions related to the patent. Cut and paste your findings (citing the source), and write a brief summary of your research findings.
1. My Company incurred significant cost to develop the patent. On the date of the business combination, the patent is 10 years old and has a useful life of 15 years.
a. According to SFAS No. 2, how should My Company have accounted for the patent? Would you expect My Company to report an asset for the patent in its balance sheet?
b. If My Company does not report an asset for the patent, will Your Company report one? If so, how will Your Company measure the initial value to record (or report) for the patent?
2. My Company purchased the patent from another company three years ago. The patent had a remaining useful life of 12 years when it was purchased. Will the valuation of the patent by My Company be the same as it would be under part 1. b above? Explain.

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  • CreatedDecember 17, 2014
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