Which of the following is not a recognized valuation technique for allocating the acquisition price to specific assets?

15. Topic: GAAP Approaches to Business Combinations Current GAAP identifies three approaches to assigning values to assets acquired in a business combination. Which of the following is not a recognized valuation technique for allocating the acquisition price to specific assets?

a. Market Approach
b. Residual Value Approach
c. Cost Approach
d. Income Approach

16. Topic: Acquired Research and Development Costs In-process intangible research and development costs acquired as part of a business combination are:

a. Expensed, consistent with the accounting treatment of a firm's own R & D expenditures
b. Debited to the Equity of the acquirer
c. Recorded as an intangible asset
d. Included in Goodwill

Solutions

Expert Solution

15) GAAP are the Generally Accepted Accounting Principle which allows companies to allocate various strategic business option. The following option which is not a recognizable valuation technique for allocating aqusition prize to fixeed assets is: option (b) Residual Value Approach as it is not the valuation technique which is used for allocating the acqusition price to specific assets.

The other Three options are correct as they are the valuation techniques which is mentioned in GAAP appraches for business combination.
(a) Magrket Approach- Help in allocating cost based on informaton from market transaction.
(c) Cost Approach- Help in allocating cost based on Current Replacement cost.
(d) Income Approach- Help in allocating cost based on Future Income .i.e. Present Value techniques.

16) Research & Devlopment Cost which is incurred in relation to intangible Reseach and Devlopment cost acquired as a part of business combination is: option (d) Included in Goodwill as research and devlopment cost is incurred on intangible R & D for business combination.

The otherThree options are incorrect as the cost acquired on Research and Devlopment do not get:
(a) Expensed with own R & D expenditure.
(b) Debited to the owner of equity.
(c) will not be recorded as Intangible Asset as it would not include in the Cost of Asset.

ekkarill92 answered 2 years ago

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