GAAP Purchase Method, IFRS Purchase Method, and GAAP Acquisition Method Accounting
The table below summarizes some differences between GAAP Purchase Method, IFRS Purchase Method, and GAAP Acquisition Method accounting.
| Item | PURCHASE METHOD: GAAP | PURCHASE METHOD: IFRS | ACQUISITION METHOD: GAAP |
|---|---|---|---|
| Purchase Price | Cash Paid + fair value of other considerations + direct costs | Same as GAAP Purchase Method. | Cash Paid + fair value of other considerations. |
| Fair Value of Subsidiary | When parent acquires less than 100%, the amount of fair value over book value is recognized in proportion to the parent's ownership. | Consolidated balance sheet recognizes the full amount of the fair value in excess of the acquired company's book value (note this difference from GAAP). | Same as IFRS Purchase Method. |
| Subsidiary Contingent Liabilities | Recognized on the sale date at fair value. | Same as GAAP Purchase Method. | Same as GAAP Purchase Method. |
| Subsidiary In-Process R&D | Recognized on the sale date at fair value, as part of the subsidiary's net assets, then expensed. | Recognized on the sale date at fair value as part of the subsidiary's net assets; reported on the consolidated balance sheet as an intangible asset. | Same as IFRS Purchase Method. |
| Minority Interest | Based on subsidiary's book value of net assets owned by minority shareholders. |
Appears between debt and equity on the consolidated balance sheet. | Either:
-
Subsidiary's fair value of net assets owned by minority shareholders, which creates partial goodwill.
-
Subsidiary's full fair value, applied to percent ownership by minority shareholders, which creates full goodwill.Appears under equity section on the consolidated balance sheet. | Subsidiary's full fair value, applied to percent ownership by minority shareholders, which creates full goodwill.
Appears under equity section on the consolidated balance sheet. |
NOTE: This table helps to highlight how the Acquisition Method in the US is more aligned with the IFRS Purchase Method.