4. Thomas Corp. acquired Dye Technologies in 2014. Thomas included the following

Question

4. Thomas Corp. acquired Dye Technologies in 2014. Thomas included the following information in its 2014 annual report We acquired Dye Technologies, Inc. on August 3, 2014 by means of a merger of one of our wholly owned subsidiaries such that Dye became a wholly owned subsidiary of Thomas. The total purchase price for Dye was $21,370 million n performing our preliminary purchase price allocation, we considered, among other factors, our intention for future use of acquired assets, analyses of historical financial performance and estimates of future performance of Dye's products. The fair values of intangible assets were calculated using an income approach and estimates and assumptions provided by both Dye and Thomas management The rates utilized to discount net cash flows to their present values were based on our weighted average cost of capital and ranged from 8% to 16%. The following table sets forth the preliminary components of intangible assets associated with the Dye acquisition Dollars in millions) Useful Life Fair Value Software support agreements and related relationships $2,408 8 years Developed technology 2,070 6 years 7 years Core technology 2,037 Customer relationships 888 8 years 95 5 years Trademarks and other Total intangible assets $7,498 Required. a. Are the intangible assets purchased in the Dye Technologies acquisition, reported on the Thomas consolidated balance sheet at the book value or at the fair value on the date of the acquisition? Explain b. Explain in plain English, how Thomas valued the intangible assets at the time of the acquisition Your explanation should explicitly include the role played by the average cost of capital c. How are the tangible and intangible assets accounted for subsequent to the acquisition? What will be the value of the acquired intangibles at the end of fiscal 2015? Assume no amortization of these assets was taken during 2014. State any assumptions that you make

Explanation / Answer

Question a. Intangible assets are shown at fair value on the date of acquisition. Question b. Intangible assets are valued at fair values. Fair valu is calculated by income approach with the estimates and assumption provided by both Thomas and Dye. This means that income estimated to be generated over its useful life by particular intangible assets were discounted to arrive at the present value of all Revenues, and it is considered as the present value of the assets. Question c Tangable assets are valued at $7,495 has been taken along with Other non tangible assets, To arrive at the purchase consideration. All liabilities are taken over along with the Assets. Finnally purchase consideration amount has been paid to the equity holders. as on Life Annual Depreciation Ending amount Value of Intangible assets: 3-Aug-14 for 2015 for 2015 Software support agreement and related relationship 2408 8 301 2107.00 Developed technology 2070 6 345 1725.00 Core Technology 2037 7 291 1746.00 Customer relationship 888 8 111 777.00 Trademarks and others 95 5 19 76.00 Value of Intangible assets 7498 1067 6431

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.