Acer Corporation Essay

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President of Acer Corp, The purpose of this letter is to provide guidance to Acer Corp on the appropriate accounting for the Theta investment. Below is an overview of the transaction followed by our findings and authorities used for the basis of our conclusions under both US and International accounting standards. From our research, it is more beneficial for Acer to headquarter in the US where only partial gains from the transaction must be recognized. This transaction included the transfers of factory equipment to Theta Corp in exchange for $1 million cash and a 25% equity ownership stake in Theta. The book basis of the transferred equipment was $6 million, and the equipment was recently appraised for $6.5 million. The fair value of the investment in Theta is $5.5 million as reasonably determined. Acer has a significant influence over Theta, but does not control financial interest in Theta. Under U.S. and international standards the appropriate accounting for this transaction is for the investment under Acer Corp to be accounted for using the equity method in the consolidated financial statements, or under the fair value option for US headquartered companies only. The FASB ASC 845-10-30 provides guidance for certain nonmonetary exchanges in which one entity transfers nonfinancial assets to a second entity in exchange for a noncontrolling ownership interest in that second entity. Exchanges of nonmonetary assets for noncontrolling ownership interest in a second entity must be accounted for at fair value and full or partial gain recognition is required. The fair value of the asset given up ($6.5M) was greater than the carrying value ($6M). Therefore a partial gain should be recognized since the entity accounts for the ownership interest using the equity method. Acer Corp should recognize a gain of $375,000 [($6.5-$6)* 75%). This provides that

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