Advanced Accounting II:
1. Intercompany Transactions I – Intercompany Land Transfers
Reading Assignment:
Beams, Anthony, Clement, & Lowensohn: Chapters 5, 6, & 7.
NOTE: Your text for this course will also be used in ACCT680 and ACCT685. Please keep your text to use in these courses.
Major changes have occurred for financial reporting for business combinations. These changes are documented in SFAS No. 141R, “Business Combinations” and SFAS No. 160, “Noncontrolling Interests and Consolidated Financial Statements” (to replace Accounting Research Bulletin 51). These new pronouncements require the acquisition method instead of the purchase method. The acquisition method emphasizes fair values for recording all combinations as opposed to the cost-based provisions of SFAS 141.
These latest FASB effort to promote the acquisition method will significantly affect several aspects of financial reporting in consolidated financial statements. Using information available on the FASB Web site, address the following:
1. Conduct a preliminary search of SFAS No. 141R, “Business Combinations” and SFAS No. 160, “Noncontrolling Interests and Consolidated Financial Statements” and discuss the basic valuation principle for measuring and recognizing business combinations under the acquisition method and the purchase method.
2. To what extent have you seen evidence that lead to the determination the “fair value” of a business at acquisition date for 100 percent acquisitions?
3. In your opinion, what other alternative ways to estimate fair value and when such alternatives might be appropriate.
4. Compare the key aspects of purchase versus acquisition method reporting requirements for an excess of fair value of the net assets acquired over consideration transferred (bargain purchase from the buyer’s perspective) in a business acquisition. Which method do you think is appropriate and why?
In your own words, post a substantive response to the Discussion Board question(s) and comment on other postings. Your response should address the DB question(s) and move the conversation forward. You will be graded on the quality of your postings, including mastery of the concept as well as critical thinking. If asked for your opinion, do not simply state that it is a good or bad idea; elaborate on your reasons and argument. Include enough detail to substantiate your thinking as well as your position on the questions or comments.
Grading Criteria
Conduct a preliminary search of SFAS No. 141R, “Business Combinations” and SFAS No. 160, “Noncontrolling Interests and Consolidated Financial Statements” 25%
To what extent have you seen evidence that lead to the determination the “fair value” of a business at acquisition date for 100 percent acquisitions? 25%
In your opinion, what other alternative ways to estimate fair value and when such alternatives might be appropriate. 25%
Compare the key aspects of purchase versus acquisition method reporting requirements for an excess of fair value of the net assets acquired over consideration transferred (bargain purchase from the buyer’s perspective) in a business acquisition. Which method do you think is appropriate and why? 15%
Substantive responses to students posts (at least two replies) 10%
TOTAL 100%
For assistance with your assignment, please use your text, Web resources, and all course materials.
Unit Materials
PART 2:
Unit 1 Individual Project: Consolidating Worksheet Adjusting Entries
Sapling, Inc. is a 95%-owned subsidiary of Fir Enterprises. Fir Enterprises sells Sapling an industrial wood chipper for $10,000 on January 1, 20×8. Fir Enterprises paid $17,000 for the wood chipper and the asset currently has a book value of $8,000. The asset has a remaining useful life of 4 years, with no salvage value.
• Provide Sapling’s entries reflecting the purchase of the wood chipper.
• Provide Fir’s entries reflecting the sale of the wood chipper.
• Provide the consolidating worksheet adjusting entries that must be made in 20×8.
• Provide the consolidating worksheet adjusting entries for 20×9 that deal with the impact of annual depreciation that occurs on the purchasing subsidiary’s books.
Please submit your assignment.
Grading Criteria
Provide Sapling’s entries reflecting the purchase of the wood chipper. 10%
Provide Fir’s entries reflecting the sale of the wood chipper. 10%
Provide the consolidating worksheet adjusting entries that must be made in 20×8. 40%
Provide the consolidating worksheet adjusting entries for 20×9 that deal with the impact of annual depreciation that occurs on the purchasing subsidiary’s books. 40%
For assistance with your assignment, please use your text, Web resources, and all course materials.
Unit Materials
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