Fair Value Measurement: Practical Guidance and Implementation, 2nd Edition

APPENDIX FOURTEEN A

Suggested Case Study Solutions

The suggested solutions to Chapter 14's fair value measurement case study are presented in this appendix. The suggested solutions have been prepared using commonly accepted valuation techniques. Recognizing that other valuation specialists may choose different techniques and assumptions, alternative solutions are possible and may have merit. In order to provide clarification, many of the solutions contain references to applicable sections of this book.

1. You have been engaged by Mobil Systems Technology Inc. to perform an acquisition date intangible asset valuation under the acquisition method. Discuss the acquisition method. What are the steps in the acquisition method? What is the measurement date of the business combination? What would cause the measurement date to differ from the closing date?

Under the acquisition method, the fair values of acquired assets are no longer simply determined by an allocation of the purchase price. The fair value of those assets acquired in the business combination is independent of the price that was paid in the transaction. FASB ASC 805, Business Combinations, outlines the acquisition method and requires that the acquirer recognize the identifiable assets acquired in a business combination separately from goodwill (ASC 805-10-05-4).

The four steps in applying the acquisition method include:

1. Identify the acquirer.

2. Determine the acquisition date—generally the date control is obtained. ...