Applying the New Accounting for Business Combinations and Intangible Assets to Partner Admissions

2014 ◽  
Vol 29 (4) ◽  
pp. 527-543 ◽  
Author(s):  
Hugo Nurnberg
Keyword(s):  
Intangible Assets ◽  
Fair Value ◽  
Simple Application ◽  
Business Combinations ◽  
Net Assets

ABSTRACT A long-standing partnership accounting issue is whether to recognize a bonus or goodwill (or other asset write-ups) upon a partner admission when the incoming partner's net asset contribution differs from his/her capital balance. Although extensively discussed in advanced accounting textbooks, that guidance is nonauthoritative, and the authoritative guidance in the FASB Codification makes almost no mention of partner admissions. This paper discusses how changes in GAAP since 2001 affect the accounting for partner admissions, especially the revised accounting for business combinations and intangible assets. It discusses the circumstances when partner admissions are business combinations. For most partner admissions that are business combinations, the partnership should recognize at fair value the net assets contributed by the incoming partner, including identifiable intangible assets and goodwill. For partner admissions that are reverse acquisitions, the partnership should revalue its own identifiable net assets and goodwill to fair value. Finally, for partner admissions that are not business combinations, the partnership should recognize the net assets contributed by the incoming partner, including identifiable and nonidentifiable intangible assets but not goodwill. Importantly, simple application of the bonus or goodwill methods that are illustrated in textbooks does not conform to GAAP for partner admissions that are business combinations.

Is Negative Goodwill Valued by Investors?

2010 ◽  
Vol 24 (3) ◽  
pp. 333-353 ◽  
Author(s):  
Eugene E. Comiskey ◽  
Jonathan E. Clarke ◽  
Charles W. Mulford
Keyword(s):  
Acquisition Cost ◽  
Fair Value ◽  
Securities Markets ◽  
Compelling Evidence ◽  
Fair Value Accounting ◽  
Accounting Standard ◽  
Business Combinations ◽  
Net Assets

SYNOPSIS: Accountants have historically distanced themselves from the concept of negative goodwill on the premise that bargain purchases should not take place in the presence of efficient securities markets. This position has been a powerful influence on the accounting for negative goodwill for over half a century. However, in line with the expansion of fair value accounting, the latest accounting standard that addresses negative goodwill, SFAS No. 141(R), Business Combinations (FASB 2007), calls for the full recognition of bargain-purchase (negative goodwill) amounts. Rather than allocating some or all negative goodwill against selected acquired assets, as has been done previously, negative goodwill is now to be recognized in the year of the acquisition as a regular item of income or gain. In essence, SFAS No. 141(R) holds that the excess of the fair value of net assets acquired over the acquiring firm’s acquisition cost constitutes the receipt of value to the acquiring firm, and should be recognized as such. While this position may seem plausible, to our knowledge there has been no research that tests whether negative goodwill is valued. Based upon a sample of acquisition transactions involving negative goodwill, our research does not provide compelling evidence that markets value negative goodwill.

A Gain by Any Other Name: Accounting for a Bargain Purchase Gain

2015 ◽  
Vol 30 (3) ◽  
pp. 233-248
Author(s):  
Mark J. Kohlbeck ◽  
Thomas J. Smith
Keyword(s):  
Fair Value ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Accounting Standard ◽  
Business Combinations ◽  
Market Values ◽  
Accounting Courses ◽  
Value Estimation ◽  
Net Assets ◽  
The Impact

ABSTRACT Students gain insight into a unique accounting treatment in acquisition accounting by completing this case—that of a bargain purchase gain (BPG). In December 2007, the Financial Accounting Standards Board (FASB) revised accounting for business combinations when they promulgated Statement of Financial Accounting Standard No. 141R, Business Combinations. Under the revised standard, acquirers record net assets of the acquiree at their respective fair market values at the time of acquisition and recognize the excess of net assets over the consideration paid as a BPG included in income from continuing operations. This case takes place after the acquisition is negotiated and the consideration is agreed upon. Students are required to estimate fair values of acquired net assets based on the information provided, determine whether goodwill or a bargain purchase gain exists, and evaluate the impact of this transaction on the financial statements. The case also requires students to consider subjectivity within the analysis, as well as to identify potential incentives that may influence certain estimates and judgments that managers make. The case is appropriate for accounting courses where business combinations, goodwill, and fair value estimation are discussed.

scholarly journals ANALISIS PENERAPAN PRINSIP PENYAJIAN DAN PENGUNGKAPAN STANDAR AKUNTANSI KEUANGAN INDONESIA TENTANG KOMBINASI BISNIS PADA LAPORAN KEUANGAN PT TELEKOMUNIKASI INONESIA (PERSERO) TBK PERIODE 2012-2014

2016 ◽  
Vol 2 (1) ◽  
pp. 23-45
Author(s):  
Siti Maimunah
Keyword(s):  
Intangible Assets ◽  
Secondary Data ◽  
Financial Statements ◽  
Fair Value ◽  
Annual Reports ◽  
Primary Data ◽  
Business Combinations ◽  
Financial Position ◽  
Business Combination

Presentation of the value of intangible assets recorded on the financial statements of PT Telekomunikasi Indonesia (Persero) Tbk, there is the value of goodwill should be presented separately to intangible assets. Presentation of goodwill which is not separated from intangible assets to become a problem for the users of financial statements to understand the content of those statements. This study aims to determine how the process of business combinations on the PT Telekomunikasi Indonesia (Persero) Tbk. The study uses secondary data from annual reports and financial statements of the period of 2012 through 2014, and primary data in the form of a questionnaire as a proponent of the theory applied by the researchers so that research will be measurable and objective. The results of this study indicate that goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the value that is recognized by the non-controlling interest and goodwill are presented in the statement of the position of non-current assets kuangan section. PT Telekomunikasi Indonesia (Persero) Tbk in the presentation of its financial statements as a whole in accordance with the standards set, but in the activities of the business combination of PT Telekomunikasi Indonesia (Persero) has not been fully in accordance with IAS 22 revised 2010 from the acquisition resulted in goodwill activities. Goodwill should have been presented in the consolidated statement of financial position on the part of non-current assets separately to other intangible assets.Keywords: Business combinations, acquisitions, goodwill, fair value.

scholarly journals Determination of the Value of Intangible Assets in the Companies of Lithuania

2017 ◽  
Vol 14 (2) ◽  
pp. 55-68 ◽  
Author(s):  
Rita Bužinskienė
Keyword(s):  
Financial Management ◽  
Intangible Assets ◽  
Fair Value ◽  
Financial Information ◽  
Financial Accounting ◽  
True Value ◽  
A Value ◽  
The Impact

AbstractIn accordance with generally accepted accounting standards, most intangibles are not accounted for and not reflected in the traditional financial accounting. For this reason, most companies account intangible assets (IAs) as expenses. In the research, 57 sub-elements of IAs were applied, which are grouped into eight main elements of IAs. The classification of IAs consists in two parts of assets: accounting and non-accounting. This classification can be successfully applied in different branches of enterprises, to expand and supplement the theoretical and practical concepts of the company's financial management. The article proposes to evaluate not only the value of financial information for IAs (accounted) but also the value of non-financial information for IAs (non-accounted), thus revealing the true value of IAs that is available to the companies of Lithuania. It names a value of general IAs. The results of the research confirmed the IA valuation methodology, which allows companies to calculate the fair value of an IA. The obtained extended IAs valuation information may be valuable to both the owners of the company and investors, as this value plays an important practical role in assessing the impact of IAs on the market value of companies.

scholarly journals CORPORATE BUSINESS VALUATION FOR MERGERS AND ACQUISITIONS

2005 ◽  
Vol 9 (3) ◽  
pp. 173-189 ◽  
Author(s):  
Bioye Tajudeen Aluko ◽  
Abdul-Rasheed Amidu
Keyword(s):  
Mergers And Acquisitions ◽  
Structural Changes ◽  
Fair Value ◽  
Prima Facie ◽  
Clear Understanding ◽  
Exploratory Research ◽  
Real Property ◽  
Business Combinations ◽  
Business Entities ◽  
Corporate Business

Business combinations including mergers and acquisitions are important features of corporate structural changes. The Investments Securities Acts (ISA), 1999 charge the Securities and Exchange Commission with the responsibility to review and approve all business combinations in Nigeria. And, real property is an integral factor in many of such strategic business decisions and, need to be set in a business context. This paper, therefore, examines how corporate business entities are and could be valued for mergers and acquisitions through exploratory research. It also explains the relevance of goodwill, marriage value, and fair value concept in corporate business asset valuation. The paper found out inter‐ alia that the value of holding property to the business needs to be measured against the return that the equity could achieve both within the business and elsewhere. It also, prima facie, shows that the role of the valuer is not one of accountant but interpreter of financial and physical information with a clear understanding of the nature of the business under consideration in merger and acquisition.

scholarly journals MENGUPAS PERSOALAN STANDAR AKUNTANSI KEUANGAN - GOODWIL DI BERBAGAI NEGARA : SUATU PENDEKATAN STUDI LITERATUR

2017 ◽  
Vol 2 (2) ◽  
Author(s):  
Deddy Kurniawansyah
Keyword(s):  
Research Method ◽  
Intangible Assets ◽  
Accounting Standards ◽  
Financial Statements ◽  
Fair Value ◽  
Financial Accounting ◽  
International Accounting Standards ◽  
Fair Value Accounting ◽  
Literature Study ◽  
Accounting Standard

This literature study explains and describe the development of the concept of goodwill from the perspective of accounting by observing and describing until the development at this time, discusses differences in accounting standards of goodwill applicable in some countries, and explains the things that contradict the goodwill. This research method used qualitative with literature study. The results of this study are in some countries, the concepts and rules on goodwill accounting have undergone various changes, including international accounting standards issued by the IASC. Initially goodwill is capitalized and amortized over no more than 20 years. But, along with the increasing use of fair value accounting in accounting standards, thetreatment for goodwill also experienced a shift that is eliminated by the amortization method is replaced by doing impairment test to goodwill. The results of this study contribute as add to the treasury of financial accounting literature, especially accounting treatment of goodwill as intangible assets in the financial statements of various countries such as Indonesia, America and the England.Keyword :Goodwiil, Impairment, Financial Accounting Standard

Convergence and Divergence Regarding Business Combinations

2021 ◽  
pp. 78-91
Author(s):  
Alin Eliodor Tănase ◽  
Traian Ovidiu Calotă ◽  
Gabriela Claudia Oncioiu
Keyword(s):  
Acquisition Cost ◽  
Balance Sheet ◽  
Financial Statements ◽  
Intangible Asset ◽  
Business Combinations ◽  
National Differences ◽  
Investment Cost ◽  
Net Assets ◽  
Convergence And Divergence ◽  
Legal Entities

The presence of several legal entities within the same group entails the existence of as many independent accountants as there are companies. In accordance with IFRS 3 “business combinations,” the result is goodwill that will be recognized as a non-current intangible asset in the consolidated balance sheet, being subjected annually to the impairment test; insofar as the investment cost is lower than the acquisition cost of the net assets, the negative goodwill will be obtained which will be recognized in the form a profit in the consolidated profit and loss account. In addition, national differences in accounting, taxation, and auditing are the sources of the various problems that arise in the process of controlling subsidiaries and consolidating accounts. This chapter aims to study the convergence and divergence regarding business combinations in the joint business as well as to analyze the managerial controversies that are presented in the conversion of the financial statements.

Intangible assets in Germany

2014 ◽  
Vol 15 (2) ◽  
pp. 235-248 ◽  
Author(s):  
Hannes Frey ◽  
Andreas Oehler
Keyword(s):  
Intangible Assets ◽  
Balance Sheet ◽  
Fair Value ◽  
Company Performance ◽  
Stock Market Index ◽  
Value Drivers ◽  
Content Type ◽  
Valuation Methods ◽  
German Stock ◽  
High Level

Purpose – Intangible assets are regarded as the future value drivers of company performance. However, hardly anything is known about the actual importance and influence of intangible assets. The purpose of this paper is to fill this gap, so the authors analyse the German stock market index DAX and accomplish a survey among the German Certified Public Accountants (CPAs) concerning intangible assets. Design/methodology/approach – In a first step, the authors analyse the balance sheet data and the corresponding notes of the companies with regard to reported values of intangible assets and applied valuation methods. The sample period covers the years from 2005 to 2008. In a second step, the authors analyse the statements of the German CPAs with regard to intangible assets. The authors sent a standardised questionnaire to all 180 offices of the top ten German auditing firms. Findings – The results indicate that intangible assets have gained in importance, while information on valuation methods is still scarce. According to the German CPAs, the current influence of intangible assets on company performance is on a high level and even will increase during the next few years. The mostly used valuation approach for the fair value measurement of patented technologies is the income approach. Furthermore, the accounting standards leave room for accounting policy – a result which casts doubt on the reliability of financial statements. Originality/value – For the first time not only annual balance sheet data but also corresponding notes regarding intangible assets are analysed. The findings are connected with a survey of an expert group for the valuation of intangibles.

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