Calculate Fair Value of Identifiable Net Assets

1
Calculate Fair Valueof Identifiable Net Assets
Step 1

• Burgers Limited takes ownership of all the assets
  of Pizza Limited, excluding cash.

Burgers Limited is the acquirer
Pizza Limited is the acquiree
Pizza Limited
Burgers Limited
2
Calculate Fair Valueof Identifiable Net Assets
Step 1
Assets Fair Value
Inventory 5,000
Equipment 12,500
Furniture 13,000
Vehicle 20,000
Total 50,500
Remember that we are using the fair values
determined by the independent valuer. These are
not the same as the values shown in the Balance
Sheet before the combination.
3
Calculate Fair Valueof Identifiable Net Assets
Step 1
Liabilities Fair Value
A/Payable 4,000
Claim 2,500
Total 6,500
The total amount being claimed is 10,000. Since
there is only a 25 chance that it will actually
be paid out, the fair value is 25 of 10,000
2,500
4
Calculate Fair Valueof Identifiable Net Assets
Step 1

• Now that we know the fair value of liabilities,
  we can subtract it from the fair value of assets
  to calculate the fair value of net assets.
• Assets 50,500
• Liabilities 6,500
• Net Assets 44,000

These amounts were calculated in the previous
slides.
End Step 1