Completion Accounts Preparation

Buyer SPA states specific accounting policies which include NIL value fixed assets

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Hi all,

just wondering on the accounting treatment for the completion accounts preparation.

 

A bit of background, client is a pharmacy, wife passed away, looking to sell his pharmacy, has a buyer, basis of sale is a share purchase agreement with no assets/liabilities, to the extent that any increase/decrease in NCA will affect the cash sale price, ie, greater NCA increases cash sales price and a decrease reduces the cash sale price.

However when reading through the SPA, specifically the required accounting principles, I noticed that one of the requirements stipulated that the fixed assets must not have any value attributed to them.

So my question is, how do I account for the effective write off of the fixed asset value (circa 40k), would it be through the PL of the completion statements, directors loan account or equity adjustment??

Any assistance would be greatly appreciated.

Replies (9)

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By David Ex
12th Feb 2024 17:08

I don’t understand. If the purchaser is buying shares, what relevance is the book value of the company’s Fixed Assets?

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By paul.benny
12th Feb 2024 17:26

The completion balance sheet determines the final sales price and that is all. The double entry for asset write off goes to reserves but as you have noted, parties are only interested in the net asset position.

A P&L is not normally expected as part of completion accounts.

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Replying to paul.benny:
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By David Ex
12th Feb 2024 17:32

paul.benny wrote:

The completion balance sheet determines the final sales price and that is all.

I thought there was an agreed price for the shares adjusted for Net Current Assets which is why I can’t see the relevance of Fixed Asset values.

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RLI
By lionofludesch
12th Feb 2024 17:56

I'm baffled.

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Replying to lionofludesch:
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By David Ex
12th Feb 2024 18:01

lionofludesch wrote:

I'm baffled.

Yup!

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Out of my mind
By runningmate
12th Feb 2024 19:43

Does this simply mean that you draw up a summary of current assets and (all) liabilities (i.e. not a full Balance Sheet)?

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Replying to runningmate:
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By paul.benny
13th Feb 2024 10:07

That's more or less it.

It sounds to me as if we have a generic SPA which has slightly confused the OP (and others). The completion balance sheet it just a way of determining the consideration.

Getting off topic, if buyer is getting a pharmacy business for just the value of net current assets, it looks like a bargain. The last I knew, pharmacy licenses alone could be worth 6-7 figure sums.

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Replying to paul.benny:
Out of my mind
By runningmate
13th Feb 2024 10:26

The OP has interpreted the request as placing a value of NIL on fixed assets. It seems to me that the lawyers may simply mean, 'Don't put any figure on fixed assets'.

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Replying to paul.benny:
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By Bobbo
13th Feb 2024 11:35

paul.benny wrote:

Getting off topic, if buyer is getting a pharmacy business for just the value of net current assets, it looks like a bargain. The last I knew, pharmacy licenses alone could be worth 6-7 figure sums.

I'm assuming (hoping??) it's more like a price of £X has been agreed for the company which is based on it having £Y net current assets at completion, so if it in fact has £Y+50,000 net current assets at completion then the price is £X+50,000.

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