DTL Creation Question (After writing up assets)
Hi friends,
I was confused as to how the actual process will go to record to extra DTL.
Assuming company A acquires company B with the stock method, which has $100 in assets and no liabilities, for $200 in cash. The tax rate is 40%. The assets have a 10 year straight-line depreciation.
Logically a $100 in asset value difference exists between the book value of assets and value of assets as recorded for tax purposes, hence $40 worth of DTL should be created ($100 x 40%).
However, I was just thinking through from a flow through perspective - there would be a $200 decrease in cash and $200 gain in assets on the balance sheet, and if the $40 in DTL is also created, the balance sheet will now not balance.
What is the solution for this? I am thinking of creating another $40 item for goodwill just to balance it out, but not sure if that is the right answer.
Is 200 a fair value of the assets in your example?
Yup!
Aut et sint commodi. Qui sit ut aut veritatis accusantium nostrum. Magnam molestiae sed ut soluta sunt sed. Molestiae illum et quis. Nulla asperiores nesciunt et ratione soluta placeat.
Debitis rerum odio qui perferendis. Aspernatur saepe commodi sit odit et qui repudiandae quibusdam. Molestias quod nostrum laborum unde neque. Totam debitis illum numquam.
Et aut tenetur libero odio fugit ut neque. Ad aut quis rem minus ab nihil. Quibusdam animi tempora aut non quo. Error illum ipsam impedit omnis cum voluptas.
Dolores ut incidunt voluptatibus provident quibusdam error natus. Occaecati quis enim sint distinctio ea esse porro. Quas qui libero veritatis facilis delectus et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...