Appendix 7.0 Acquisition of BELL Corporation On 1 January 2017, FIBERBOATS acquired 100% of BELL Corporation. FIBERBOATS issued 50,000 shares of its BD0.600 par ordinary shares, with a market price of BD0.400 on the date the acquisition was announced and BD0.800 on the date the acquisition was completed, for all of BELL Corporation ordinary shares. The book value of net assets of BELL Corporation at the date of acquisition was BD10,000. On that date, the fair value of BELL Corporation assets and liabilities equalled their respective carrying amounts with the exception of property, plant and equipment (PPE) that exceeded its book value by BD120,000. The fair value of BELL’s identifiable intangibles (in-process research and development) is BD70,000. The in-process research and development will be amortized over 5 years. Advise the management of FIBERBOATS on the accounting treatment in relation to the acquisition event that occurred on 1 January 2017 (see appendix 7). Your advice should include the following: 1. Explanation of the applicable financial reporting standard(s). 2. Discussion of the application of the financial reporting standard(s), including the preparation of the related journal entries . 3. Discussion of alternative accounting treatment(s) when the degree of control over the investee is less than 100%.
Appendix 7.0 Acquisition of BELL Corporation
On 1 January 2017, FIBERBOATS acquired 100% of BELL Corporation. FIBERBOATS issued 50,000 shares of its BD0.600 par ordinary shares, with a market price of BD0.400 on the date the acquisition was announced and BD0.800 on the date the acquisition was completed, for all of BELL Corporation ordinary shares. The book value of net assets of BELL Corporation at the date of acquisition was BD10,000. On that date, the fair value of BELL Corporation assets and liabilities equalled their respective carrying amounts with the exception of property, plant and equipment (PPE) that exceeded its book value by BD120,000. The fair value of BELL’s identifiable intangibles (in-process research and development) is BD70,000. The in-process research and development will be amortized over 5 years.
Advise the management of FIBERBOATS on the accounting treatment in relation to the acquisition event that occurred on 1 January 2017 (see appendix 7). Your advice should include the following:
1. Explanation of the applicable financial reporting standard(s).
2. Discussion of the application of the financial reporting standard(s), including the preparation of the related
3. Discussion of alternative accounting treatment(s) when the degree of control over the investee is less than 100%.
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