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.
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: