Shakespeare Acquisition Of New Publishing Company Case Summary

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Date: February 24, 2014 From: Class 2014 To: Shakespeare Inc. Re: Medical Benefits Payable, Line of Credit Modification, and Acquisition of New Publishing Company 1. Management recognizes its IBNR liability in accordance to the guidance of ASC 405-30-25-1. Although management has the history of accurately estimating the IBNR liability, there is a $0.5 million difference between the estimated liability amount and the actual claims amount received. Management should reduce its IBNR liability to $0.75 million. This will result an increase of net income by $0.5 million. 2. ASC 470-50-40-21(b) states “If the borrowing capacity of the new arrangement is greater than or equal to the borrowing capacity of the old arrangement, then any unamortized…show more content…
In accordance to ASC 805-20-25-1, Shakespeare should recognize $2 million of current assets, $5 million of the identifiable noncurrent assets acquired, $2 million of intangible assets, and $1million of goodwill at March 10, 2011, the acquisition date. ASC 805-20-25-6 requires Shakespeare to classify or designate, at the acquisition date, the identifiable assets acquired and liabilities assumed as necessary to subsequently apply other GAAP. The company should make those classifications or designations on the basis of the contractual terms, economic conditions, its operating or accounting policies, and other pertinent conditions as they exist at the acquisition date. 4. If Shakespeare were an SEC filer, ASC 805-10-50-2(h) requires Shakespeare to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting

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