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Hi,
Can you answer for the below case..
Lets suppose, if a running company is accquired by two persons,
And they have paid an excess amount of money to the old parties to leave the company.Lets suppose they paid 1.5 m and the book value of the assets was 1m… in this case they can record the goodwill in acquiree company books?
Because parent don’t have any books in this case..
How we will treat this case under the IFRS 3 business combination or it will be treated in any other standard.
Hi,
It would be likely that a company would be formed by the investors that would then acquire the other company. Any goodwill recognised would be in the books of the parent, that has now been formed.
The tow individuals are then then share holders in their company that then controls the newly acquired entity.
I doubt that you would see anything like this in the exam.
Thanks
No, the case i write here is
The two individuals pay this amount and buy the company, where the old parties took the money and left the company.
In this case if any excess amount paid more than the book value of the assets at time… is a goodwill?
or if not, than where the new parties will show the excess money paid.
Hi,
Any excess is goodwill and will be recorded in the books of the parent company.
Thanks
Excuse me Chris, I think I can Help.
@has199
I think in this case, there will be no entries in the company since the money paid and received does not affect the company. It comes out of the pocket of the new shareholders and goes to the pocket of the leaving. No money goes into the business and so nothing happens in the acquired company.As Chris said, if the buyer is a company then there will be entries in that company´s books, and probably goodwill, since the buying company will record the cash it paid, the investment acquired and the difference will be Goodwil.
I know we are not supposed to be answering in the “Ask the Tutor”, Sorry Chris.
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