Corporate Finance Business Combinations

Question: Discuss about the Corporate Financefor Business Combinations. Answer: Introduction An intangible asset describes an identifiable non-monetary asset deprived of physical substance. The recognition of this kind of asset needs the underlying entry to show that the asset meets (i) the definition of the intangible asset and (b) the recognition criteria. The accounting requirements for this kind of asset is outlined under the IAS 38. Such assets has to be non-monetary ones without physical substance as well as identifiable either as being separate or emerging from the contractual or additional legal rights (AASB 2004). The intangible assets that meet the appropriate recognition criteria are measured initially at the cost and then measured at the cost or utilizing revaluation model, as well as amortized on the systematic basis over their respective useful lives (unless it has indefinite useful life whereby it is never amortized). The definition and recognition criteria are extremely relevant to the conditions presented in the underlying case. The accounting requirements of the intangible assets are also relevant to the conditions in the case. Particularly, the intangible has to be non-monetary deprived of physical substance and identifiable either as being separate or emerging from contractual or other legal rights. These factors will help the CEO justify his reasons for the decisions he is making. The trade name is an intangible asset and hence it is identifiable thus needs to be amortized and acquisition of this name generates a goodwill which is emerging from contractual purchase of smaller betting agencies and must be amortized. The view the new CEO on each of issues presented above are justifiable. As presented in the above definition and recognition criteria, the CEO is justified to amortize the goodwill and the trade name (AASB 2014). These intangible assets also meet the relevant recognition criteria and it is justifiable to measure them initially at the cost and then measured at the cost on the basis of their useful life. The accounting implications of these issues on financial statements can be presented. Amortizing the name and the goodwill will increase the asset side of the balance sheet. These will increase the dividends given to the shareholders or investors. The investors will be willing to invest more while lenders will also have more confidence to lend the company more. References AASB, C.A.S., 2004. Intangible Assets. AASB, C.A.S., 2014. Business Combinations. Disclosure, 66, p.77.