Purchase accounting

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Purchase accounting

Method of accounting for a merger that treats the acquirer as having purchased the assets and assumed the liabilities of the acquiree, which are then written up or down to their respective fair market values. The difference between the purchase price and the net assets acquired is attributed to goodwill.

Purchase Accounting

In mergers and acquisitions, a method of accounting that treats the acquiring company as if it bought the assets and assumed the liabilities of the target company; all the assets and liabilities are placed on the acquiring company's balance sheet according to their current market value. Because the purchase price of the target company often exceeds this, pooling-of-assets accounting is more common. See also: Goodwill.

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Under FAS 141, companies must use the purchase accounting method for new M&A transactions, since the pooling of interests method has been eliminated.

Jumping Through Hoops: Goodwill Offers Investors Clarity and CFOs Complexity

With the new standards, FASB mandates a purchase accounting method for business combinations that requires companies to conduct an annual goodwill impairment test based on the fair value of the reporting unit.

Say good-bye to pooling and goodwill amortization

The transaction is expected to close sometime next week and will be accounted for under the purchase accounting method. Additional financial details will be disclosed in Legato's second quarter earnings conference call.

Legato acquires SCH Technologies

In addition, it admitted that it is considering further acquisitions in the same area and Chrisntensen said: "we will either buy, license, or develop any technology necessary to be number one in this industry...period." Under the terms of the deal, each share of Level One stock will be exchanged for 0.43 shares of Intel stock and the merger will be accounted for using the purchase accounting method. Based on Thursday's Intel closing price, the agreement values Level One a t $48.75 per share, an 80% premium over its Thursday close of $27.125.

INTEL ACQUIRES LEVEL ONE FOR $2.2BN

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