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- 2011-7-11
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2#
发表于 2011-7-13 16:16
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Your investment represents your proportionate control of the company.
Control = Equity
Equity = Asset - Liability, ie Net Assets
Although they don't have an explicit Equity line, you know Equity = Net Assets. So if your Investment (cash paid) > proportionate share of Equity, then you paid "too much" (based on historical cost).
Because historical cost is just that, this is the time you can measure the assets you purchased at Fair Value. Any excess price you paid will then be allocated to those assets whose Fair Value exceeded their Book Value. In this case, PP&E and Land both exceed their book value. Any remaining excess that can't be allocated goes to Goodwill.
Going forward, you can depreciate any of that excess allocated towards those assets. But REMEMBER, land can NEVER be depreciated! So even though Land and PP&E took some of that allocation, only the PP&E allocation can be depreciated.
Thus in the years following the transaction, both Investor & Investee will recognize a depreciation expense of that excess premium, by their respective ownership amount - this case being 32.5% for Suburban.
Another note, excess can also be allocated towards Inventory but it must then be expensed. To sum up, excess premium paid should be allocated to identifiable assets whose Fair value exceeds Book Value. The remaining excess goes to Goodwill.
PPE excess can be depreciated
Inventory excess must be expensed
Land excess cannot be depreciated. |
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