Professional Documents
Culture Documents
Consolidation Mechanics
stock purchase at book value
Pre-acquisition
balance sheets
Investor
Company
Current assets
Post-acquisition
balance sheets
Investee
Company
Investor Company
(Equity method)
Consolidated
$ 5,000
$ 1,000
$ 5,000
$ 6,000
3,000
Other assets
10,000
4,000
10,000
14,000
Total assets
$15,000
$5,000
$18,000
$20,000
Liabilities
$ 5,000
$2,000
$ 5,000
$ 7,000
Common stock
7,000
2,000
10,000
10,000
Retained earnings
3,000
1,000
3,000
3,000
$15,000
$5,000
$18,000
$20,000
Investment
Consolidation exercise
+
-
Investment
Exxon
Mobil
mini-case
Intangibles
Intangibles
Current
Current and
and noncurrent
noncurrent assets
assets
that
that lack
lack physical
physical substance.
substance.
Do
Do not
not include
include financial
financial
instruments.
instruments.
When
When should
should an
an Intangible
Intangible
be
be recognized?
recognized?
Does
Does itit arise
arise from
from contractual
contractual
or
or other
other legal
legal rights?
rights?
Can
Can itit be
be sold
sold or
or otherwise
otherwise
separated
separated from
from the
the acquired
acquired
enterprise?
enterprise?
Newspaper mastheads
Noncompetition agreements
Customer-related intangible assets
Customer lists
(4)Pictures, photographs
Lease agreements
Construction permits
Franchise agreements
Employment contracts
Technology-based intangible assets
Patented technology
Unpatented technologies
Hewlett-Packard provides the following allocation of its $24.2 billion purchase price
for Compaq Computer in the footnotes to its 2002 10-K.
In millions
Tangible assets
3,615
Accounts receivable
4,305
Financing receivables
1,241
Inventory
1,661
1,475
1,146
2,998
1,914
1,942
1,501
Product trademarks
74
Liabilities
assumed
1,422
Goodwill
14,450
Accounts payable
(2,804)
(2,704)
Accrued restructuring
IPR&D
(960)
(5,933)
(1,908)
735
$
24,170
yes
Consolidation of
VIEs
Value both
sides of balance sheet independently:
Avoiding Consolidation
(Fitch Structured Finance paper)