Excess Purchase Price and Liabilities under Acquisition method

Hello everyone.

So, excess purchase price = Cost of acquisition – BV of net assets acquired.

And then we allocate that excess to identifiable assets and liabilities that have fair market values different from their book values.

Can someone please clarify how to treat allocation of excess purchase price on liabilities if their fair market value is different from book value? Thanks!


Most likely you would end up paying more for the asset. i.e. you will generate goodwill.

Also you will have to take net PPE in account.

I would be interested if somebody else can chime in here.


You won’t get that on the exam.

Just know the treatments of PPE, inventory and land excess under the equity method.

For acquisitions, the excess purchase price (goodwill) is the FV of the firm’s equity, minus FV of net identifiable assets. That’s the full goodwill method.