Q1-5 z A znoncontrolling zinterest zexists zwhen zthe zacquiring zcompany zgains zcontrol zbut
zdoes znot zown zall zthe zshares zof zthe zacquired zcompany. zThe znon-controlling zinterest zis
zmade zup zof zthe zshares znot z owned zby zthe zacquiring z company.
Q1-6 z Goodwill z is z the z excess z of z the z sum z of z (1) z the z fair z value z given z by z the z acquiring z compan
(2) zthe zfair zvalue zof zany zshares zalready zowned zby zthe zparent zand z(3) zthe zacquisition-
date zfair zvalue zof zany znoncontrolling zinterest zover zthe zacquisition-date zfair zvalue zof zthe
znet zidentifiable zassets zacquired zin zthe zbusiness zcombination.
Q1-11 zWhen zthe zacquisition zmethod zis zused, zall zcosts zincurred zin zbringing z about z the
zcombination zare zexpensed zas zincurred. zNone zare zcapitalized. zHowever, zcosts
z associated zwith zthe zissuance zof z stock z are zrecorded zas za zreduction zof z additional zpaid-in
zcapital.
Q1-13 zIf zthe zfair zvalue zof z a zreporting zunit zacquired zin za zbusiness zcombination zexceeds
zits zcarrying zamount, zthe zgoodwill zof zthat zreporting zunit zis zconsidered zunimpaired. zOn zthe
zother zhand, zif zthe zcarrying zamount zof zthe zreporting zunit zexceeds zits zfair zvalue,
zimpairment zof zgoodwill zis zimplied. z An z impairment z must z be z recognized z if z the z carrying
z amount z of z the z goodwill z assigned z to zthe zreporting zunit zis zgreater zthan zthe zimplied zvalue
zof zthe zcarrying zunit‘s zgoodwill. zThe zimplied zvalue zof zthe zreporting zunit‘s zgoodwill zis
zdetermined zas zthe zexcess zof zthe zfair zvalue z of z the zreporting zunit z over zthe zfair zvalue
zof z its znet z identifiable z assets.
Current zaccounting zstandards zrequire zthat zacquired zcompanies zbe zvalued zunder zASC z805
zat zthe zfair zvalue zof zthe zconsideration zgiven zin zthe zexchange, zplus zthe zfair zvalue zof zany
zshares zof zthe zacquiree zalready zheld zby zthe zacquirer, zplus zthe zfair zvalue zof zany
znoncontrolling zinterest zin zthe zacquiree zat zthe zcombination zdate z[ASC z805]. zAll zother
zacquisition-related zcosts zdirectly ztraceable zto zan zacquisition zshould zbe zaccounted zfor zas
zexpenses zin zthe zperiod zincurred z[ASC z805]. zThe zcosts z incurred z in z issuing z common z or
z preferred z stock z in z a z business z combination z are z required z to zbe z treated z as z a z reduction
z of z the z recorded z amount z of z the z securities z (which z would z be z a z reduction zto zadditonal
zpaid-in zcapital zif z the zstock z has za zpar zvalue zor za zreduction zto zcommon zstock zfor zno
zpar zstock).
A z total z of z$720,000 z was z paid z in z completing z the z Kline z acquisition. z Kline z should z rec
z the
$200,000 zfinders‘ zfee zand z$90,000 zlegal zfees zfor ztransferring zKline‘s zassets zand zliabilities
zto zTroy zas zacquisition zexpense zin z20X7. zThe z$60,000 zpayment zfor zstock zregistration
zand zaudit zfees zshould zbe zrecorded zas za zreduction zof zpaid-in zcapital zrecorded zwhen zthe
zTroy zCompany zshares zare zissued zto zacquire zthe zshares zof zKline. zThe zonly zcost
zpotentially zat zissue zis zthe z$370,000 zlegal zfees zresulting zfrom zthe zlitigation zby zthe
zshareholders zof zKline. zIf zthis zcost zis zconsidered zto zbe za zdirect zacquisition zcost, zit
zshould zbe zincluded zin zacquisition zexpense. zIf, zon zthe zother zhand, zit zis zconsidered zto zbe
zrelated zto zthe zissuance zof zthe zshares, zit zshould zbe zdebited zto zpaid-in zcapital.
Primary zcitation
ASC z805
C1-2 z Evaluation zof zMerger
a. AT&T z had z a z vast z cable z customer z base, z but z felt z that z TimeWarner‘s z content
z would z greatlyzenhance zthe zdemand zfor zits zcable zservices.
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