- This topic has 3 replies, 2 voices, and was last updated 1 year ago by
P2-D2.
P2-D2.-
Posts
-
mklymenko
- Topics: 3
- Replies: 15
- ☆
Hi,
There is a question in BPP I would need some explanation about.
C Co acquired 70% of B Co’s 100K $1 ordinary shares for $800K when the RE of B Co were $570K.
B Co also has an internally generated customer list which has been valued at $90K. The NCI in B Co has a FV of $220K at the date of acquisition.
What was the goodwill arising on acquisition?
The answer given in the book is $350K, i.e.:
Consideration transferred 800
NCI @ acquisition 220
Net Assets (RE + Shares) 670
Goodwill 350Why the customer lists FV is not included in the net assets of the acquired entity? It is an identifiable asset, it has a valuation (cost can be measured) and we could expect future economic benefits.
It was my understanding, that if it was e.g. a brand value instead we would include it into total of net assets as identified and measured intangible, why is it different for customer lists?
Thanks a lot in advance!
P2-D2
- Topics: 4
- Replies: 6115
- ☆☆☆☆☆
Hi,
The customer list can be capitalised as part of a business combination, so would be included within the net assets acquired. Is there something additional in the question that highlights why it might not be?
Thanks
mklymenko
- Topics: 3
- Replies: 15
- ☆
Hi,
Thanks for reply!
No, the whole question as in the book is right there.
So then it must be an ommission in the answers bank of the book
P2-D2
- Topics: 4
- Replies: 6115
- ☆☆☆☆☆
If there is not anything else in there highlighting why it should not be included then there is something wrong with the question.
I don’t recall seeing this as part of a section C question in any recent exams so I’d not worry too much about it.
Thanks
mklymenko
P2-D2- You must be logged in to reply to this topic.