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If you are planning to buy or sell shares, a correctly drafted share purchase agreement (SPA) is essential. An SPA is a legal document and it must therefore comply with legislation by providing either party in the transaction with accurate information. Share Purchase Agreement (SPA) - guide and example accountsandlegal.co.uk ? legal-advice ? share-pur... accountsandlegal.co.uk ? legal-advice ? share-pur...
These journal entries will involve debiting and crediting various accounts such as cash, accounts payable/receivable, inventory, goodwill (if applicable), and retained earnings. It is essential that these entries accurately reflect the financial impact of the acquisition on both companies involved.
As part of acquisition accounting, you must report the acquired company's fair market value between the net tangible and intangible assets recorded on your balance sheet. If there's any difference between the two types of assets, this is recorded as goodwill.
You record acquisition costs on a company's balance sheet under the fixed assets section. The total cost included on the balance sheet includes all costs incurred to use the asset, including costs associated with getting the asset working and producing.
This is done by calculating the net assets of the subsidiary at acquisition and multiplying this by the percentage owned by the non-controlling interest. Under the fair value method, the non-controlling interest at acquisition will be higher, meaning that the goodwill figure is higher.
When the acquirer uses the acquisition accounting method, the target is treated as an investment. The target's assets and liabilities are netted using current fair market value and if the amount paid for the target is greater than that netted value, the difference is considered as goodwill. Purchase Acquisition Accounting: Definition and How It Works investopedia.com ? terms ? purchaseacquisit... investopedia.com ? terms ? purchaseacquisit...