2) Lebron Co. acquired the entire outstanding shares of common stock of Cavaliers Co. On the...

2) Lebron Co. acquired the entire outstanding shares of common stock of Cavaliers Co. On the acquisition date the total fair value of net identifiable assets acquired (i.e., far value of identifiable assets acquired and liabilities assumed) was greater than the consideration transferred for the shares.

Research and cite a specific paragraph in the Accounting Standard Codification that can help the company to determine how this difference should be recognized in the consolidated financial statements. Unless specifically requested, your response should not cite implementation guidance and illustrations.

FASB ASC - - -

Expert Solution

Cite:

350-20-15-4 A private company may make an accounting policy election to apply the accounting alternative in this Subtopic. The guidance in the Accounting Alternative Subsections of this Subtopic applies to the following transactions or activities: b. Goodwill that an entity recognizes in a business combination in accordance with Subtopic 805-30 after it has been initially recognized and measured Amounts recognized as goodwill in applying the equity method of accounting in accordance with Topic 323 on investments—equity method and joint ventures, and to the excess reorganization value recognized by entities that adopt fresh-start reporting in accordance with Topic 852 on reorganizations. 350-20-15-5 An entity within the scope of the preceding paragraph that elects the accounting alternative shall apply all of the related subsequent measurement, derecognition, other presentation matters, and disclosure requirements upon election. The accounting alternative, once elected, shall be applied to existing goodwill and to all additions to goodwill recognized in future transactions within the scope of this accounting alternative.

The portion of the difference between the cost of an investment and the amount of underlying equity in net assets of an equity method investee that is recognized as goodwill in accordance with paragraph 323-10-35-13 (equity method goodwill) shall be amortized on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates that another useful life is more appropriate.

In order to calculate goodwill, the fair market value of identifiable assets and liabilities of the company acquired is deducted from the purchase price. Goodwill as: An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised.

ekkarill92 answered 4 months ago

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