When a change of company control occurs, such as an acquisition, a valuation of the assets acquired must be performed to be compliant with generally accepted accounting principles, as mandated by the Financial Accounting Standards Board (FASB) and addressed in Accounting Standards Codification (ASC) 805: Business Combinations. This type of exercise is commonly referred to as a purchase price allocation, since the purchase price of the subject company is allocated across all tangible and intangible assets and liabilities acquired. Generally, the value of the subject company is greater than the value of the acquired assets, or in other words, “the whole is greater than the sum of the parts.” However, what if the sum of the parts is greater than the whole? This paper looks at transactions involving fair value and bargain purchases, the differences between the two, and how bargain purchases should be addressed.
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Spring 2017
Research Article|
March 01 2017
A Primer on Bargain Purchases and Negative Goodwill
Dan Daitchman, ASA
Dan Daitchman, ASA
Dan Daitchman is a manager with Great American Group in their Corporate Valuation Services practice. Dan provides valuations of assets, including business interests, intellectual property, and various other intangible assets. His valuation work is primarily used for financial reporting, tax, asset-based lending, transaction advisory, as well as fairness and solvency opinions. Dan is also an Accredited Senior Appraiser of the American Society of Appraisers. He can be reached at [email protected].
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Business Valuation Review (2017) 36 (1): 9–14.
Citation
Dan Daitchman; A Primer on Bargain Purchases and Negative Goodwill. Business Valuation Review 1 March 2017; 36 (1): 9–14. doi: https://doi.org/10.5791/0882-2875-36.1.9
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