From the course: Accounting Foundations: Asset Impairment
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Acquiring an entire business
From the course: Accounting Foundations: Asset Impairment
Acquiring an entire business
- Sometimes one company will buy another company, not just a subset of the assets of the other company, but the whole thing. For example, in 2012, Disney purchased all of Lucasfilm, the company owned by George Lucas, the creator of Star Wars. The total purchase price was $4.1 billion. Now the purchase of an entire company raises a number of accounting issues. The first thing to remember is that unlike in a basket purchase, the assets of the acquired company are not recorded at an amount arrived at by allocating the total purchase price according to relative market values. Instead, all acquired assets of the acquired company are recorded in the books of the acquiring company at their full estimated market values as of the acquisition date. The second major accounting issue associated with the purchase of an entire company is the recording of goodwill. One way to think of goodwill is that its the value of the…
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