Session 3Changes in Ownership

1
Session 3Changes in Ownership

• Non-termination Changes
• Increase in partners
• New partners
• Business combination
• Decrease in partners
• Withdrawal
• Death or incapacity
• Purchase of an interest by a 3rd party
• Individual transaction

2
Primary Issues

• Book value does not equal current value
• Existence of intangibles

3
BV ? CV

• Revaluing assets simplest approach!
• Special P L provisions
• Bonus provisions
• General approach
• Either increase or decrease, just change the
  direction of the approach
• 3 methods 2 situations 3 outcomes

4
Methods, Situations, Outcomes

• Methods
• Asset revaluation
• Special P L provisions
• Bonus
• Situations
• Increase
• Decrease
• Outcomes
• Est. CV equals actual CV
• Est. CV greater than actual CV
• Est. CV less than actual CV

5
Existence of Intangibles

• Same 3 methods as CV ? BV
• Working forward knows goodwill
• Working backward calculates goodwill