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on 1/04/2013 P acquired 75 % the 12million 50 cents equity shares of S . S had been experiencing difficult trading conditions and making significant losses . It’s retained earnings at the acquisition date were $14.3 million . in allowing for S’s difficulties , P made an immediate cash paymentof only $1.50 per share . In addition P will pay a further amount in cash on 30/09/2014 if S returns to profitability by that date. The value of this contingent consideration at the date of acquisition was estimted to be $ 1.8, but at 30/09/2013 million. in the light of continuing losses , it’s value was estimated at only $1.5 million . The contingent consideration has not been recorded by P. Overall , the directors of P expect the acquisition to be a bargain purchase leading to negative goodwill.
At the date of acquisition shares in S had a listed market price of $1.20 each.calculate good will .
my question;
how do you find contingent consideration“how do you find contingent consideration”
You look at the sixth line above where it says:
“contingent consideration at the date of acquisition was estimted to be $ 1.8”
Is there a problem with including $1.8 million in your calculations in respect of contingent consideration?
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