Research Report 2 (ACCT521)
Consolidation & VIE
Case I: Consolidation related with Goodwill and Intangible Assets
P Co. recently acquired S Co. The combined firm consists of three related businesses that will
serve as reporting units. In connection with the acquisition, P requests your help with the
following assets evaluation and allocation issues. By using what you have learned in this course
and with references to FASB ASC as appropriate.
P recognizes several identifiable intangibles from its acquisition of S. It expresses the desire to
have these intangible assets written down to zero in the acquisition method.
The price P paid for S indicates that it paid a large amount of goodwill. However, P wo
ies that
an future goodwill impairment may send the wrong signal to the investors about the wisdom of
the acquisition S. P thus wishes to allocate the combined goodwill of its reporting units to one
account called Enterprise Goodwill. In this way, P hopes to minimize the possibility of goodwill
impairment because of a decline in goodwill in one business unit could be offset by an increase
in the value of goodwill in another business unit.
Instruction:
1. Please advice P about the acceptability in its immediate write-off its identifiable
intangibles.
2. Indicate the relate factors to consider in allocating the value assigned to identifiable
intangibles acquired in a business combination to expense over time.
3. Advice P on the acceptability of its suggested treatment of goodwill.
4. Indicate the relative factors to consider in allocating goodwill across an enterprise’s
usiness units.
(Note: You are welcome to cite some sentences/opinion from the publication in your report but
emember to cite them in a co
ect way, e.g., APA 5th.)
Case II: VIE
We know that FASB ASC “Variable Interest Entities” has affected lots of organizations that
consolidate entities qualified as controlled VIEs. Please google and locate one financial report of
a publicly listed company (a business that issues stock and trade on the public stock market) that
consolidate VIEs. Using the financial report (the most recent year you can find) to write a
ief
eport about a). the reasons for consolidation of VIEs. And b). the effect of the consolidation of
the VIEs on the company’s financial statements.
(Note: You are welcome to cite some sentences/opinion from the publication in your report but
emember to cite them in a co
ect way, e.g., APA 5th.)