I’m still a university student and anything to with capital budgeting has been a challenge for me!
I have seen a lot of discussion on goodwill and I would like to try my best to clear the air.
Goodwill arises when a company with subsidiaries must consolidate all of the entities controlled by the parent into one set of comprehensive financial statements called the consolidated financial statements.
Goodwill is calculated when a company makes an acquisition of another company. I will use an example to illustrate my thoughts.
EXAMPLE:
I will use ACB and MedReleaf as an example. However, I won’t use real figures for the sake of simplicity.
ACB acquires 100% of MedReleaf for $1B.
Step 1:
The acquisition price of $1B will be compared to the Net Asset Value of MedReleaf (Assets-Liabilities)
Let’s assume MedReleaf has $800M of assets and $200M of Liabilities for a Net Asset Value of $600M. ($800M-$200M=$600M)
The difference between the acquisition price of $1B and the Net Asset Value of $600M is called the Acquisition Differential, which has a value of $400M.
The acquisition differential represents the portion of the purchase price which cannot be allocated to the Net Asset Value before our revaluation of the MedReleaf Balance Sheet items. (discussed in Step 2)
Step 2:
At the date of acquisition it is required that assets and liabilities of the acquired company (MedReleaf) must be written to Fair Market Value. We will allocate the acquisition differential (Purchase Price-Net Asset Value) to these assets and liabilities because they were show on the MedReleaf Financial Statements at the individual accounts last valuation date, and the increases and decreases in value were not reflected in our calculation of Net Asset Value and Acquisition Differential above.
Acquisition Differential: $400M We will now allocate. The acquisition differential to the items on the Balance Sheet of MedReleaf that require adjusting.
The FMV adjustments of the assets and liabilities at the date of acquisition are as follows:
Asset Adjustments A. Property Plant and Equipment is undervalued by $100M, so we will allocate $100M of the $400M Acquisition Differential to write up this account of MedReleaf, leaving us with $300M Acquisition Differential.
B. Inventory of MedReleaf is overstated by $50M, so we will do the reverse to the Acquisition Differential as we did in Step A. We will increase the Acquisition Differential by $50M because the revaluation decreasing the value of an asset has a negative effect on the Net Asset Value of the company by the $50M amount.
... keep reading on reddit ➡Explain Goodwill to me like I am 5 and “it’s a big plug” is not acceptable 😂
I am currently studying accounting, and I just learned about Goodwill. It seems kind of like "Voodoo" Accounting. Why would you overpaying for a company be considered an asset to your company, and why should that be reflected in equity? Accounting has always made a lot of sense to me, but this does not.
Context being I started to miss Payments around Covid time about 7 late payments total I sent a goodwill letter to the CEO they tried to call me and I called them today and they are able to take off 5 late payments of course it’s not not of them but 5 is still a lot !
Total purchase price of the business is $150k, they are giving a down payment of $40k and the rest is seller financing.
The corporation will have a $110k promissory note so where would that balance out, goodwill?
Is goodwill only recorded on an acquirer's books?
What if a target company does not merge with an acquirer and continues to operate as a standalone entity? We can assume it was an all cash acquisition to make things easy. Any help or clarification is appreciated.
Accounting final project, need to record two transactions concerning goodwill with the business purchase price being $30 000 and the Goodwill costing $6000. Teacher never went into depth about it, confused about how to create two
transactions from it.
Thanks.
I called multiple times and was told that Capital One doesn’t change what has been reported to the credit bureaus no matter what. I even emailed the CEO last week explaining why I was 30 day late on Jan. 2020. Today, I received a call from them just to inform me that they will not change anything in my credit report. I believe I exhausted all of my options at this point. Any suggestions?
Hey everybody, I'm looking for support to help me answer a question as to where purchase accounting adjustments get booked. My thought is that it's booked to goodwill, but the debate is that it can be to the P&L in certain circumstances.
As you all know, trying to find the answer in guides to accounting for income tax is 10x more difficult than necessary, so while I continue to search I was wondering if anybody knows this one off hand. THANKS
The end of scarcity could no, should have been an announcement that brought with it a sense of excitement and abundance. Industry players should have been busily adjusting their spreadsheets, happily funding that they should restart those old production lines because they were profitable again. Miners should have been resubbing their multibox mining fleets in anticipation of an explosion of wealth about to beep in every single system in New Eden. Grizzled war vets should have been bitterly looking forward to amassing a vast war chest for the next time the galaxy erupted into another great war. And finally alliance leaders should have been planning for the strategic implications of defending space that is once again worth fighting for.
But none of this happened. Instead that last group is planning a protest in Jita tomorrow because of how universally terrible this news has been received.
CCP, how could you fuck up delivering what should have been good news?
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