What are some reasons for the purchase price being in excess of the carrying amount of the acquiree's assets and liabilities? What does this say about the accuracy of the values used in the financial statements of the acquiree?
Answer to relevant QuestionsHow is goodwill determined at the date of acquisition? Describe the nature of goodwill. In the preparation of a consolidated balance sheet, the differences between the fair value and the carrying amount of the subsidiary's net assets are used. Would these differences be used if the subsidiary applied push-down ...If one company issued shares as payment for the net assets of another company, it would probably insist that the other company be wound up after the sale. Explain why this condition would be part of the purchase agreement. Is a negative acquisition differential the same as negative goodwill? Explain. Under the entity theory, consolidated goodwill is determined by inference. Describe how this is achieved, and comment on its shortcomings.
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