Can someone summarize to me the IPR&D accounting in US-GAAP and IFRS. Its hard to decode whats written in Schwesr-FSABook-Pg-135
IPR&D US GAAP - IPR&D of target firm is reported at Fair value as an identifiable asset during Purchase Price allocation, goodwill is computed and recorded on the books. After that the IPR&D is immediately expensed on the Acquirer’s income statement. (No longer exists, except as part of goodwill during Purchase acquisition). IFRS: IPR&D is an asset, and is amortized of its remaining useful life.
When the parent company takes over the subsidiary and accounts for it under the purchase method, goodwill is computed as FV of assets less FV of liabilities. The IPR&D of the subsidiary is included in the FV of assets mentioned above. Once the goodwill is computed and recorded in the books of the holding company, the tangible assets are depreciated while the intangible assets are ammortised accordingly. US GAAP: The IPR&D of the subsidiary is immediately recorded as an expense in the income statement of the parent company i.e not allowed to appear on the balancesheet any further. IFRS: The IPR&D will appear on the balancesheet of the holding company. It is ammortised over its useful life i.e charged to the income statement in piece meal as compared to its treatment under GAAP
Thanks Daggny & cpk.