Accounting

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Re: Food For Thought

Objective

1. Determine the total considerations transferred.

2. The land and buildings should be recorded on the premise of “in-use” or “in-exchange”.

3. Determine the fair value recorded for the intangible assets.

Applicable accounting pronouncement

ASC 805-20-25 Business Combinations-Identifiable assets and liabilities and any non controlling interest-Recognition

Recognition Conditions

25-2     To qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in FASB Concepts Statement No. 6, Elements of Financial Statements, at the acquisition date. For example, costs the acquirer expects but is not obligated to incur in the future to effect its plan to exit an activity of an acquiree or to terminate the employment of or relocate an acquiree’s employees are not liabilities at the acquisition date. Therefore, the acquirer does not recognize those costs as part of applying the acquisition method. Instead, the acquirer recognizes those costs in its postcombination financial statements in accordance with other applicable generally accepted accounting principles (GAAP).

25-3     In addition, to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must be part of what the acquirer and the acquiree (or its former owners) exchanged in the business combination transaction rather than the result of separate transactions. The acquirer shall apply the guidance in paragraphs 805-10-25-20 through 25-23 to determine which assets acquired or liabilities assumed are part of the exchange for the acquiree and which, if any, are the result of separate transactions to be accounted for in accordance with their nature and the applicable GAAP.

25-4     The acquirer’s application of the recognition principle and conditions may result in recognizing some assets and liabilities that the acquiree had not previously recognized as assets and liabilities in its financial statements. For example, the acquirer recognizes the acquired identifiable intangible assets, such as a brand name, a patent, or a customer relationship, that the acquiree did not recognize as assets in its financial statements because it developed them internally and charged the related costs to expense.

ASC 805-20-25 Business Combinations-Identifiable assets and liabilities and any non controlling interest-Initial Measurements

Assets that the Acquirer Intends Not to Use or to Use in a Way Other than Their Highest and Best Use

30-6     For competitive or other reasons, the acquirer may intend not to use an acquired asset, for example, a research and development intangible asset, or it may intend to use the asset in a way that is not its highest and best use. Nevertheless, the acquirer shall measure the asset at fair value determined in accordance with Subtopic 820-10 reflecting its highest and best use in accordance with the appropriate valuation premise, both initially and for purposes of subsequent impairment testing.

ASC 805-20-55 Business Combinations-Identifiable assets and liabilities and any non controlling interest-Implementation Guidance and Illustrations

Recognition of Intangible Assets Separately from Goodwill

55-2     Paragraph 805-20-25-10 establishes that an intangible asset is identifiable if it meets either the separability criterion or the contractual-legal criterion described in the definition of identifiable. An intangible asset that meets the contractual-legal criterion is identifiable even if the asset is not transferable or separable from the acquiree or from other rights and obligations. For example: • a.  An acquiree leases a manufacturing facility under an operating lease that has terms that are favorable relative to market terms. The lease terms explicitly prohibit transfer of the lease...
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