If a company that is obliged to compile consolidated financial statements (group parent) takes over the majority of another company’s shares (subsidiary), this acquisition must be depicted in the next consolidated financial statements.
In order to depict the transaction, the entire purchase price must be allocated to the assets and debts individually taken over from the subsidiary. All assets that have been taken over must be taken into account here, meaning also those that were not previously capitalised because self-produced intangible assets were subject to a capitalisation prohibition. In addition, the assets must be set at fair values / market values, i.e. the previous carrying amounts are no longer relevant and hidden reserves and liabilities necessarily have to be disclosed. In the end, this process results either in positive goodwill or negative bad will, if any gap remains between the purchase price paid on the one hand, and the total fair value of the acquired assets and debts on the other.
Aspects of overall business valuation and the valuation of individual assets come together in purchase price allocations. Particularly in the case of intangible assets, the latter presents a challenge that should not be underestimated. A lack of expertise and / or staff capacity can quickly lead to problems here. We will be pleased to support you as far as is necessary.