Allocating Purchase Price Including Intangibles Deutsche Tulekom AG, headquartered in Bonn,…

Allocating Purchase Price Including Intangibles

Deutsche Tulekom AG, headquartered in Bonn, Germany, is the largest telecommunicate ions company in Europe. The company uses IFRS to prepare its financial statements. Assume that during 20 11, Deutsche Telekom acquired a controlling interest in Hellenic Telecommunications Organization, S.A. (Hellenic). The table below shows the pre- and post-acquisition values of Hellenic's assets and liabilities.

Required

a. At the acquisition, which measurement does the company use, fair value or carrying value, to record the acquired tangible and intangible assets on its consolidated balance sheet?

b. At the acquisition dare, why is fair value of goodwill less than its carrying value?

c. What are some possible reasons why intangible assets increased in value at the acquisition date?

d. Describe accounting for goodwill. Why is an impairment test difficult to apply?

e. What would Deutsche Telekom record if it detem1ined at the end of fiscal 201 1 that the goodwill purchased in the Hellenic acquisition had a reliably measured fair value of €2,000? Later, if in 20 14 the company determined that the fair value of the Hellenic goodwill was €3,000, how would its balance sheet and income statement be affected?

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