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On August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in...

On August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene’s 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition.

Why did Celgene acquire Receptos?

What accounting method was used, and for what amount, to record the acquisition?

What amount did Celgene include in pre-combination service compensation in the total consideration transferred? What support is provided for this treatment in the Accounting Standards Codification (see ASC 805-30-30, paragraphs 9-13)?

What allocations did Celgene make to the assets acquired and liabilities assumed in the acquisition? Provide a calculation showing how Celgene determined the amount allocated to goodwill.

Describe the nature of the in-process research and development product rights acquired by Celgene in its acquisition of Receptos.

How will Celgene account for the in-process research and development product rights acquired in the Receptos combination?

Solutions

Expert Solution

Please go through the press release of Celgene corporation before taking the answers.

How will Celgene account for the in-process research and development product rights acquired in the Receptos combination? Post seperately

What amount did Celgene include in pre-combination service compensation in the total consideration transferred? What support is provided for this treatment in the Accounting Standards Codification (see ASC 805-30-30, paragraphs 9-13)? Post seperately

What accounting method was used, and for what amount, to record the acquisition?

Acquisition method comes into play when company acquires the other company and the acquirer company uses the GAAP standards.

Calegene accounted for its August 27 2015 acquisition of Receptos using the acquistion method .Accordingly Calgene recorded the acquisition of $7.6 billion.

Why did Celgene acquire Receptos?

The reason of acquisition can be understood from press release of the Celegene from 2015

The acquistion of Receptos significantly enhances Celegenes inflammation and Immunlogy (I & I) portfolio,further diverisfies the company revenue beginning in 2019 and beyond and builds upon Celegene's growing expertise in inflammatory bowel disease (IBD).The transaction adds Ozanimod a novel potential best in class ,oral,once daily selective sphingosine 1 -phosphate 1 and 5 receptor modulator (S1P) to celegen's deep and diverse pipeline of potential disease -altering medicines and investigational compounds.

What allocations did Celgene make to the assets acquired and liabilities assumed in the acquisition? Provide a calculation showing how Celgene determined the amount allocated to goodwill.

Goodwill can be calcuated as follows:

Cash                                                                                                $7311.20

Precombination service compensation        $314.90

Total fair Value of consideration transfered                                   $7626.20

Working Capital (Cash,A/R,A/P,Etc)               $479.20

Property plant and Equipment                        $5.00

In Process research and development         $6842.00

Current Deferred Taxes                                   $241.30

Other Non Current assets                               $7.90

Non Current deferred tax liabilities              - $2519.20

Total Fair Value of Net identifiable assets                                         $ 5056.20

Goodwill                                                                                            $2570.00

How will Celgene account for the in-process research and development product rights acquired in the Receptos combination?

The in process R & D Products that are acquired will be recorded as the intangible assets of the company.

ekkarill92 answered 1 year ago
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