If the assets of a subsidiary are reported at below fair value in the balance sheet...

If the assets of a subsidiary are reported at below fair value in the balance sheet at the date of acquisition, and a fair value adjustment is not undertaken as part of the consolidation process, will goodwill be overstated? Why or why not?

Expert Solution

If the assets of a subsidiary are reported at below fair value in the balance sheet at the date of acquisition, and a fair value adjustment is not undertaken as part of the consolidation process in that case goodwill will be overstated because when the doing the acquisition analysis, the purchase consideration will be compared with net assets acquired at book value which is less than the fair value resulting in more goodwill .

ekkarill92 answered 2 years ago

Which of the following are now reported at fair market value on the balance sheet and...

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