Acquisition Method - Wiley

Question 1

What’s the formula to determine whether to recognize goodwill or a gain on an acquisition?

Answer 1

Fair value of consideration transferred or cost to acquirer

Plus: FV previously held equity interests in acquiree (revalued to FV)

Plus: FV of noncontrolling interest (revalued to FV)

Less: FV of net identifiable assets

= Goodwill or < Gain >

Question 2

What is a “step acquisition”?

Answer 2

Acquirer invests less than 50% in voting shares of acquiree and then at a later date acquires additional shares at which point they have “control” or more than 50% of voting shares.