Chap001_Day2_class - Please finish group selection and...

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± Please finish group selection and email me the list by 5pm this Friday. 1
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± Student Helpers ± each class: 2 students help with recording class participation ± reward: 3 bonus points ± Participation ± 1 point for answering a question or ask a eaningful course lated question meaningful course-related question ± 2 bonus points for doing in-class problems on e white board 2 the white board
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± Class participation grading Top 40% 10 points iddle 30% 5 ±points Middle 30% 7.5 points Bottom 30% 5 points Grades lower than 5 may be given under 3 certain circumstances.
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hapter 1 Part II Chapter 1 Part II Accounting for Business Combinations ± Evolution of Accounting Methods for Business Combination erms and Concepts for Acquisition ± Terms and Concepts for Acquisition Method otal Differential & Goodwill ± Total Differential & Goodwill argain Purchase 4 ± Bargain Purchase
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Accounting and Reporting Methods rior to June 2001 ± Prior to June 2001 ± There were two acceptable methods for reporting business combinations--the Purchase Method and the Pooling Method. ± Goodwill should be amortized over a period not to exceed 40 years. ± June 2001 – 2007 ± Pooling Method is disallowed. (SFAS 141) ± Goodwill is no longer amortized, but should be tested for impairment at least annually. If goodwill is impaired, its carrying amount is reduced and an impairment loss is recognized. (SFAS 142) 5
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± 2007 ± Acquisition Method replaced “Purchase Method” (SFAS 141R) ± Acquisition Method must be used if the acquisition date is in fiscal years beginning on or after December 15, 2008. ± Treatment of Goodwill remains the same -- GW is not amortized but will be tested annually for impairment.) 6
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Purchase v. Pooling of Interest ± purchase accounting ± Required by SFAS 141 in June 2001 ± Target’s ownership interest eliminated ± Transaction recorded at fair market value ± pooling of interest ± No longer GAAP ntinuity of ownership ± continuity of ownership ± stock offered in payment ± transaction recorded at book value of target’s owner’s equity 7
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Why didn’t FASB simply disallow pooling method and require all firms to use purchase method and amortize the goodwill? Pooling or Purchase + No GW Amor. + Purchase + GW Amor. GW Impairment Test Purchase + GW Amor. 8
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Managers Dislike Purchase with GW Amortization. "The elimination of the pooling method will pg discourage mergers of knowledge-based companies and will have a chilling effect on the flow of venture capital to promising new sectors." said Jim Barksdale, President of the Barksdale roup and former CEO of Netscape. "From my Group and former CEO of Netscape.
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This note was uploaded on 10/14/2009 for the course MGMT 503 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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Chap001_Day2_class - Please finish group selection and...

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