When acquiring a business, typically all of the assets and liabilities will be acquired, even those off-balance sheets. Consider operating leases. This is a legal liability that currently is not reflected on a balance sheet. How is this accounted for upon acquisition and for consolidation? Consider ASC Codification 805-20 through 25 .
When acquiring a business, typically all of the assets and liabilities will be acquired, even those off-balance sheets. Consider operating leases. This is a legal liability that currently is not reflected on a balance sheet. How is this accounted for upon acquisition and for consolidation? Consider ASC Codification 805-20 through 25 .
However, the following two exceptions would apply:
1. The acquirer company would recognize an intangible asset if the terms of the operating lease were favorable or a liability if the terms were unfavorable relative to market terms.
2. The acquirer company may have acquired an identifiable intangible asset if a willing market participant would pay a price for the lease even if it is at market rates (i.e., to provide entry into an otherwise impenetrable market).
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