Chapter 12 - Solution Manual

Paragraph discussion sequence 151 the simultaneous

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paid differs from the tax basis of the asset shall not result in immediate income statement recognition. [EITF 98-11, paragraph DISCUSSION, sequence 15.1] ][The simultaneous equations method shall be used to record the assigned value of the asset and the related deferred tax asset or liability. (See Example 25, Cases A and B [paragraphs 740-10-55-171 through 55-182] for illustrations of the simultaneous equations method.) For purposes of applying this requirement, the following applies: [EITF 98-11, paragraph DISCUSSION, sequence 15.2] ] a. [ An acquired financial asset shall be recorded at fair value, an acquired asset held for disposal shall be recorded at fair value less cost to sell, and deferred tax assets shall be recorded at the amount required by this Topic. [EITF 98-11, paragraph DISCUSSION, sequence 16] ] b. [ An excess of the amounts assigned to the acquired assets over the consideration paid shall be allocated pro rata to reduce the values assigned to noncurrent assets acquired (except financial
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268 assets, assets held for disposal, and deferred tax assets). If the allocation reduces the noncurrent assets to zero, the remainder shall be classified as a deferred credit. (See Example 25, Cases C and D [paragraphs 740-10-55-183 though 55-191] for illustrations of transactions that result in a deferred credit.) The deferred credit is not a temporary difference under this Subtopic. [EITF 98-11, paragraph DISCUSSION, sequence 17] ] c. [ A reduction in the valuation allowance of the acquiring entity that is directly attributable to the asset acquisition shall be accounted for as an adjustment of the purchase price in accordance with paragraph 266 of FASB Statement 109, Accounting for Income Taxes , before that Statement’s amendment by FASB Statement 141 (revised 2007). (See Example 25, Case E [paragraph 740-10-55-192] for an illustration of the simultaneous equations method when a preexisting valuation allowance will be reduced as a result of acquiring the asset.) [EITF 98-11, paragraph DISCUSSION, sequence 18.1] ][Subsequent accounting for an acquired valuation allowance (for example, the subsequent recognition of an acquired deferred tax asset by elimination of a valuation allowance established at the date of acquisition of the asset) would be in accordance with paragraph 30 of FASB Statement 109, Accounting for Income Taxes , before that Statement’s amendment by FASB Statement 141 (revised 2007), which would reduce to zero other noncurrent intangible assets related to that acquisition, if any, and recognize any remaining reductions in the valuation allowance in income. [EITF 98-11, paragraph DISCUSSION, sequence 18.2] ] FASB ASC 12-3 Undistributed Earning of a Subsidiary Search income taxes and undistributed earnings 740-30-25 25-17 The presumption in paragraph 740-30-25-3 that all undistributed earnings will be transferred to the parent entity may be overcome, and no income taxes shall be accrued by the parent entity, for entities and periods identified in the following paragraph if sufficient evidence shows that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation. A parent entity shall have evidence of specific plans for reinvestment of
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