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However, specific assets you obtain as part of the acquisition may have to be depreciated or amortized, which means at least part of their cost will make its way to the income statement. Initial Acquisition In business terms, an "acquisition" means purchasing another company, such as a competitor, a supplier or a distributor.
Initially, an acquisition affects only the balance sheet. The assets and liabilities of the company you purchased simply get added to your existing assets and liabilities on your balance sheet. Any difference between the net value of those assets and liabilities and the price you paid for the company -- and there usually will be a difference -- also goes on the balance sheet as an intangible asset called "goodwill.
Capitalizing Costs Under standard accounting rules, any costs you incurred to carry out the acquisition are considered part of the purchase price. As such, they go on the balance sheet as capitalized costs, not on the income statement as expenses.
If, for example, you had to pay legal fees to get the sale documents prepared or severance to employees of the company you bought out, those costs get rolled directly into the purchase price for accounting purposes.
That means the tangible assets must be depreciated and the intangible ones except for goodwill amortized over their useful lives.
Through depreciation and amortization, a portion of the cost of the acquisition eventually shows up on the income statement as an expense. In general, you report the difference between the book value of the asset, which is what you paid for it minus any depreciation or amortization, and the selling price.
If you sell it for more than book value, you report a gain not revenue on your income statement. If you sell it for less than book value, you report a loss not an expense. References 2 Accounting Coach: Income Statement About the Author Cam Merritt is a writer and editor specializing in business, personal finance and home design.Chapter 5 Consolidation Following Acquisition Consolidation Following Acquisition • The procedures used to prepare a consolidated balance sheet as of the date of acquisition were introduced in the preceding chapter, that is, Chapter 4.
• . Regulatory Notice announced the SEC’s approval, pursuant to FINRA Rule , of the Derivatives and Other Off-Balance Sheet Items Schedule (OBS) as a supplement to the FOCUS report. Let me conclude by stating that this acquisition plays to the strength of Primoris.
It allows us to use our strong balance sheet to make an attractively priced strategic acquisition and use our. Chapter 4 Consolidation As Of The Date Of Acquisition Consolidation-Date of Acquisition • The procedures used in accounting for intercorporate investments were discussed in Consolidated Balance Sheet: – At the date of consolidation, investment cost equals total book value, and, there.
SCHEDULE III (See section )[Effective from 1st April, ][Division I. Financial Statements for a company whose Financial Statements are required to comply with the Companies (Accounting Standards) Rules, Determine the noncontrolling interest balance subsequent to the date of acquisition of a subsidiary.
S Balance Sheet) 2,, , , 0 2,, Balance Sheet 86 CHAPTER 3 CONSOLIDATION SUBSEQUENT TO THE DATE OF ACQUISITION.