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Share caital unknown at time of acquisition?

PostPosted: Fri Oct 26, 2007 9:17 am
by Hot Asien Teen

If anyone has seen this I would be very thankful to know how you handled it.

We are process improving with a bit of new functionality, but its not really a system question more of a process question.

essentially what happens is that a company is purchased, however, the buyer does not kow the full amount of the aquisition. The buyer therefore posts 1gbp share capital in, in order to correctly mark the period of aquisition in the heirarhies. They then wait until the investment has been settled, and posts the full amount in later. (Purchase method with group shares).

This means that the system thinks there is a huge amount of negative goodwill, as the actual trial bal of the company greatly exceeds the amount paid. It also means we have massive amounts of manual corrections and re-classes.

Has anyone heard of this kind of nonsense before?

PostPosted: Tue Oct 30, 2007 7:14 am
by dans
I suggest that the initial entry for investment coincide with the percent of subsidiary equity for the acquisition to avoid goodwill initially. Once the final investment is determined, update the investment balance as well as subsidiary equity as an increase or decrease in capital.

PostPosted: Tue Oct 30, 2007 7:43 am
by Hot Asien Teen
Thanks. Really.

PostPosted: Thu Nov 08, 2007 5:52 am
by Hot Asien Teen
A bit further along...

We have time stamped heirarchies here. So in order to see the acquisition represented correctly from the period of acquisition, they post an initial consolidation with 1£ share capital. When the bean counters have finished counting the beans, and the know how much it is worth, they post a subsequent consolidation which generates the goodwill entries and MI etx.

It seems to be quite a standard practice.