25-02-2014, 06:59 PM
How should you capitalize an acquisition and report your balance sheet?
I am still learning some basic reading of balance sheet and came across something very strange. I hope to learn a thing or 2 from expert here.
This case study involved Pan United paying $100M for an acquisition and and capitalized it at only 30M. And wrote 70M as a "loss".
Is this correct? Who or what accounting rule decides they should capitalize at 30M or 100M? As I recall in accounting, they paid $100M, they should capitalize this on their balance sheet at $100M.
What are they thinking doing this.....
My guess is that
-the directors want to buy their own shares?
-They want to increase ROA/ROE performance?
-Avoid taxes?
- Some accounting rule requires them to do this ?
I really dunno. anyone can advice me what is going on?
Am I mis-understanding some accounting rules wrongly?
[Image: jTpq0cW.png]
I am still learning some basic reading of balance sheet and came across something very strange. I hope to learn a thing or 2 from expert here.
This case study involved Pan United paying $100M for an acquisition and and capitalized it at only 30M. And wrote 70M as a "loss".
Is this correct? Who or what accounting rule decides they should capitalize at 30M or 100M? As I recall in accounting, they paid $100M, they should capitalize this on their balance sheet at $100M.
What are they thinking doing this.....
My guess is that
-the directors want to buy their own shares?
-They want to increase ROA/ROE performance?
-Avoid taxes?
- Some accounting rule requires them to do this ?
I really dunno. anyone can advice me what is going on?
Am I mis-understanding some accounting rules wrongly?
[Image: jTpq0cW.png]