From what I remember, the diff between the fair value of a company and the purchase price is the goodwill. However, in ch 23, the book says the diff. is recorded as g/l on the income statement for IFRS. Am I missing something?
The “residual” difference between purchase price and the identifiable net assets is goodwill. The excess purchase price is first allocated to the assets that have FMV greater than book value. The remainder is accounted for as goodwill. I think what they are saying here is the excess price allocated to the assets are recognized in I/S for amortization (PP&E) or expense (inventories). For eg: if the PPE was allocated an excess of 9,000 and the useful life is 10 yrs, $900 will be used to reduce the income from associate reported on the investor’s ledgers. So, the diference they are talking about is the difference that arises due to amort of assets. Does this help?
Yes it definitely does! Thanks inginla!
red bull is my energy
the difference between fair value and book value, is allocated to the assets acquired but must be amortised through the income statement over the deemed life of the assets. the amortisation excludes land.