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Sale And Insurance Contracts Should Be Measured At Their Fair Market Value Essay

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Step 1. As of the acquisition date, tangible assets and liabilities need to be measured at their fair market value. However, items such as lease and insurance contracts, among others, need to be measured at their inception date. Step 2. As of the acquisition date, intangible assets and liabilities need to be measured at their fair market value. At this point, various items may not be recorded on the balance sheet, thus it may cause the task of measuring intangible assets and liabilities to be difficult for the owner. In addition, some intangibles cannot be recognized as assets under Generally Accepted Accounting Principles (GAAP).
Step 3. On the acquisition date, measure and record the non-controlling interest in the acquiree at its fair value. If an active market exists, the owner can obtain the fair value amount from the sellers’ market price of the stock. Moreover, if there are no control premium associated with the non-controlling interest, then the fair value amount will probably be less per share than the price the owner paid to buy the asset. Step 4. On acquisition date, measure the many types of consideration that may be paid to the seller at its fair value. Some examples of consideration include debt, a contingent earnout, account, stock, cash, and other types of assets. Moreover, the amount of any future payment obligations should be included in the consideration calculation by the acquirer.
Step 5. On acquisition date, measure the amount of any goodwill or
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