An acquiring company may be motivated to report a larger bargain gain to improve its bottom...
An acquiring company may be motivated to report a larger bargain gain to improve its bottom line. All of the following manipulations could be used to overstate the gain, except which one?
| A. |
Understate the discount rate used to measure the fair value of acquired liabilities. |
|
| B. |
Understate the present value of an earnings contingency. |
|
| C. |
Understate the value of previously unreported intangible assets acquired. |
|
| D. |
Understate the value of acquired contingent liabilities such as pending lawsuits. |
Homework Answers
C. Understate the value of previously unreported intangible assets acquired.
The acquiring company reports a larger bargain gain on acquisition if the acquisition cost is less than the fair value of the identifiable net assets acquired. This could be possible by
- Understate the discount rate used to measure the fair value of acquired liabilities.
- Understate the present value of an earnings contingency.
- Understate the value of acquired contingent liabilities such as pending lawsuits.
- Overstate the value of previously unreported intangible assets acquired.
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An acquiring company may be motivated to report a larger bargain
gain to improve its bottom...
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