Atold Corporation reports goodwill of $40 million on acquisition of Benholm Company. One month later, Atold learns that Benholm's portfolio of AFS debt investments is worth $3 million more than estimated at the date of acquisition. How is this reported, if the information is (1) a better estimate of the portfolio's value at the date of acquisition (within the measurement period), or (2) is due to events occurring subsequent to the acquisition (after the measurement period). (1) Within the measurement period (2) After the measurement period A. Decrease in goodwill Gain in OCI B. Decrease in goodwill Not reported C. Not reported Gain in OCI D. Gain in OCI Not reported

Question

Business

Devin Simon

30 June, 16:09

Atold Corporation reports goodwill of $40 million on acquisition of Benholm Company. One month later, Atold learns that Benholm's portfolio of AFS debt investments is worth $3 million more than estimated at the date of acquisition. How is this reported, if the information is (1) a better estimate of the portfolio's value at the date of acquisition (within the measurement period), or (2) is due to events occurring subsequent to the acquisition (after the measurement period). (1) Within the measurement period (2) After the measurement period A. Decrease in goodwill Gain in OCI B. Decrease in goodwill Not reported C. Not reported Gain in OCI D. Gain in OCI Not reported

+5

Answers (1)

Know the Answer?

Conner Conrad · Answer 1

B) Decrease in goodwill : Not reported

Explanation:

Generally the measurement period should last a reasonable amount of time (it is not a fixed period but it shouldn't last more than a year), and during that time the buyer should try to make any adjustments regarding the recently acquired company and its assets. Many times an asset might have an assigned value that "should be" similar to the fair market value, but should is not the same as "is".

Any adjustment made during the measurement period must be reported as part of the acquisition process. If the adjustments are made after the measurement period is over, there is no need to report it.