Corporate Accounting Assignment
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Corporate Accounting Assignment

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Question

Your discussion should cover the following points:

  1. Detailed evaluation of the acquisition analysis: (include the offer price, method of payment, FVINA allocation and goodwill. 
  2. Comment on whether the goodwill was appropriate? (Justification of goodwill)

Provides persuasive opinion supported with extensive evidence on the appropriateness of the amount of goodwill paid on acquisition.

Solution

Detailed evaluation of the acquisition analysis: (include the offer price, method of payment, FVINA allocation and goodwill. 

An acquisition will happen when a target company is dissolved from existence and becomes part of the acquired company. These kinds of takeovers may be called hostile takeovers in some cases. The acquisition is successful of two banks for creating a unique customer base and partners focused on the financial services. The distribution network Adelaide bank is very strong while Bendigo is mainly focused on the retail banking. Both the banks had been committed to high levels of stakeholder engagement and had developed distinct and innovative strategies to become leaders in their fields. 

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Bendigo Bank and Adelaide Bank, the merged the entity with the overall market capitalization of the $3.9 billion with approx 380 banks branched and $43 billion in loans. Moreover, the ratio of Bendigo Bank shares per Adelaide Bank shares is 1.075, and the Bendigo Bank owns 55% holding whether the Adelaide Bank owns the 45% holding (Anon., 2007). The Adelaide bank shareholders approve the acquisition by the Adelaide scheme of arrangement. 

The FVINA value of both the banks in the year 2007 is $17,001.6, but after the merger, the value of assets increased in 2008 and became $48,110.9. Moreover, the liabilities in the year 2007 are $15,986.6, but after the merger, the value of liabilities increased in 2008 and became $44,840.9. Because of the complexity of the acquisition, the fair value of the assets requires provisional are subject to overall review during next 12 months tie following the acquisition. The overall Goodwill of $1,429 million in which recognizes goodwill on consolidation of Adelaide goodwill is $1,369.7 million. Moreover, the amortization of the intangibles increases up to 106% because of a goodwill impairment loss of $4.0 million. 

The goodwill is calculated as the extra amount above the real valuation that is paid for an acquisition. This was a merger. In this case, the value of Goodwill of Bendigo bank before acquisition was $93.7m. and post the merger, the merged entity had a goodwill of $1460.4.

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