purchase acquisition

Popular Terms
Method of acquisition accounting used where more than ten percent of the purchase price is paid in cash, debt, or preferred stock (preference shares), or where other criteria for pooling of interest is not met. On the consolidated balance sheet the buyer firm records the acquired assets revalued at the market price less liabilities assumed at cost, and the difference between the purchase price and the revalued net assets as goodwill. Goodwill is then amortized over the permitted period (usually 40 years) and, in some countries, as a tax deductible expense. Net income of the acquired firm is recognized from the date it was acquired.
Also called purchase accounting.

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