Question

Patold Corporation reports goodwill of $40 million on acquisition of Senholm Company. Subsequently, Patold learns that one of Senholm’s buildings has increased in value by $4 million. How is this reported, if the information is discovered (1) within the measurement period, and (2) after the measurement period is over?

                              (1) Within the measurement period            (2) After the measurement period

1. Decrease in goodwill                                                      Gain on income statement
2. Increase in goodwill                                                       Not reported
3. Decrease in goodwill                                                      Not reported
4. Increase in goodwill                                                       Gain on income statement

Answer 1

Generally the measurement period should last a reasonable amount of time (it is not a fixed period but it shouldn\'t last more than a year), and during that time the buyer should try to make any adjustments regarding the recently acquired company and its assets. Many times an asset might have an assigned value that "should be" similar to the fair market value, but should is not the same as "is".Any adjustment made during the measurement period must be reported as part of the acquisition process. If the adjustments are made after the measurement period is over, there is no need to report it.

so answer is option (C) Decrease in good will: not reported