Accounting for Purchase of business and assets of company previously in administration? Fair value adjustments of stock and elected contracts? Is there an ifrs I can refer to for guidance?
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Have I read it correctly that company A bought company B? Administration is clouding the issue.
In Co A, the journal will
Dr Investments
Cr Bank (Ed?)
You may then need to adjust the Investment balance, the other side being either a Revaluation Reserve or P&L Impairment.
In Co B (the purchasee), the TB is the TB at the time of purchase. The change in ownership doesn’t effect it.
You say both that a company has been purchased and that the business and assets of a company have been purchased. You need to start by getting your head straight on which of these two very different events has occurred.
But if it’s an asset purchase, the acquirer will account for the assets acquired at cost, which usually will come from the sale and purchase agreement. Is your problem that the SPA is silent on this?
What does your FV adj relate to?
Let’s assume you paid £Y for assets valued at £X plus something for the business.
Cr bank £Y
Dr assets £X
Dr goodwill £(Y-X)
Whatever the item(s) you want to do a FV adjustment for, dr/cr that balance, the other side going to ‘Impairment’ or ‘Revaluation’ (P&L) or ‘Revaluation Reserves’ (Capital & Reserves)
Why do there need to be fair value adjustments?
The purchaser must have agreed that the values were fair when they bought them - otherwise they wouldn’t have done.
I must agree with John. Fair value adjustments are something to keep accounting standard setters awake at night.
It's fair value is what you agreed to pay for it.
I don’t mean to be rude, but are you an accountant, either internally or externally for this company?