business combiantions

Why would you buy it? And how much would you pay? How much are the shares worth? Yes, you're right! It is a strange question

In fact sir, i have never came across such a scenario, thats why im asking what should we do in case this happens in exams. i think the p2 examiner can think of something plausible to make such a scenario possible. i guess anything should be possible with acca.... (just some random figures) Purchase price= 200k Net assets= -50K so goodwill = 250k? doest seem right

I would almost guarantee that such a scenario will NOT come up, neither in a P2 exam nor in practice! If a company has negative assets (net liabilities) why PAY anything? Why not simply ask (if you're that keen) the directors and shareholders to let you take over the liabilities? At the moment I own a company that has Share Capital of €100, Retained Earnings of €(350) and Net Assets less Liabilities of €(250) Will you pay me money to buy my €100 share capital? Hmmm!

cant this situation arise if you receive an unsecured loan?

makes sense, thx mr mike

Icedawn, please explain what your thinking is rashid, you're welcome

hmm a new start up tech company who is developing a very promising technology for the future, probably incurring losses and need fundings leading to a negative net worth. A big company like goggle or apple may be interested in buying them out...just a thought lol

If they have negative net assets, why would anyone buy them out? You would only buy something of value Now ...... although their book valued assets may be negative, their knowhow and / or other intangibles may have a value greater than book value. When Apple or Google comes along, the net negative assets will be reappraised at fair value for the purposes of the vulture swallowing the victim and, in that situation, the FAIR VALUED net assets may in fact have a positive value Ok?

ok i understand what you're saying. thx

You're welcome

That could be a possible scenario for the exam, i hope the examiners doest read the forums lol

Well, it's too late for this year and, if he should ever include it, you'll be long gone - qualified and earning millions!