For tax purposes in a statutory merger, the buyer amortizes any purchased goodwill on a straight-line basis over 15 years. In contrast, no tax deduction is allowed for goodwill in stock acquisitions, so taxable asset acquisitions are, in this sense, buyer friendly.

When an asset is acquired?

An asset acquisition strategy is when one company buys another company through the process of buying its assets, as opposed to a traditional acquisition strategy, which involves the purchase of stock.

How do you find the tax basis of an asset?

Calculating Your Tax Basis Your tax basis for an asset is generally what it cost you to obtain the item, including any transaction costs. For example, if you buy stock for $850 and pay a $5 transaction fee, your basis is $855.

Is there goodwill in an asset acquisition?

In a business acquisition, goodwill is recognized as an indefinite-lived intangible asset and tested for impairment. Goodwill is not recognized in an asset acquisition. Even if there is economic goodwill in the transaction, this amount is allocated to the assets acquired based on their relative fair values.

How do you acquire assets?

An asset acquisition is the purchase of a company by buying its assets instead of its stock. An individual who owns stock in a company is called a shareholder and is eligible to claim part of the company’s residual assets and earnings (should the company ever be dissolved).

What is tax basis accounting?

A tax basis is the value of an asset that is used when determining the gain or loss when the asset is sold. Generally, it equals the asset purchase price minus any accumulated depreciation.

How are asset acquisitions accounted for in accounting?

Accounting for Asset Acquisitions AA.1 Overview and Scope The term “asset acquisition” is used to describe an acquisition of an asset, or a group of assets, that does not meet the U.S. GAAP definition of a business in ASC 805-10.1An asset acquisition may also involve the assumption of liabilities.

How are deferred taxes recognized in an asset acquisition?

Deferred taxes Generally recognized for most temporary book/tax differences related to assets acquired and liabilities assumed under ASC 740. Generally recognized for temporary book/tax differences in an asset acquisition by using the simultaneous equations method in accordance with ASC 740 (see Section AA.3.5).

What happens to your taxes after an acquisition?

An acquisition will typically result in additional tax forms and elections to be filed either with the tax return or separately with the IRS.

What is a roadmap to accounting for asset acquisitions?

This Roadmap provides Deloitte’s insights into and interpretations of the guidance on accounting for an acquisition of an asset, or a group of assets, that does not meet the U.S. GAAP definition of a business in ASC 805-10.