goodwill measurement

Broad Transactions1

1. 805-40Reverse Acquisitions805 Business Combinations

   ASC 805-40 explains how to apply the acquisition method when the legal acquirer (the entity that issues equity, often a public shell) is the accounting acquiree and the legal subsidiary is the accounting acquirer — a reverse acquisition. The accounting acquiree must be a business, and all recognition and measurement principles of 805-10, 805-20 and 805-30 (including goodwill) apply, but consideration transferred is imputed as the number of shares the legal subsidiary would have had to issue to give the legal parent's owners their resulting ownership percentage (805-40-30-2). The consolidated statements are issued in the legal parent's name yet are a continuation of the legal subsidiary's financial statements, with the subsidiary's legal capital retroactively restated to the parent's equity structure (805-40-45-1 through 45-2).