Purchase Accounting - Acquisition of Foreign entity

[d3wu]

Hi,

Here's the scenario:

- An American company "AMCO" (reporting under USGAAP) acquires a Canadian company "CANCO" (which reports under IFRS).

- AMCO follows USGAAP and so applies the purchase accounting method to account for the acquisition, which requires that the fair market values be assigned to the identifiable assets and liabilities of CANCO. The difference between the FMVs and the book values, is a purchase accounting adjustment. My question is: do the book values of CANCO need to be conformed first to USGAAP, before calculating the purchase accounting adjustments? Or, do you leave the book values as carried under IFRS, then write up/down those values to FMV? I think it's the former (as it makes sense to me to first convert the IFRS statements to USGAAP basis, then apply purchase accounting), but I need confirmation.

Thanks for any help!!!

DW

 

[kirby]

Your instincts are correct. Convert the canadian amounts to usd first

 

[d3wu]

When you say "usd", just want to make sure you realize this is not a foreign exchange issue/question? You mean the Canadian GAAP amounts should be conformed first to USGAAP based amounts, correct?

 

[kirby]

I agree it makes more sense to convert to US GAAP and USD and then to apply the purchase acctg valuations. But I can't find a cite for you on this in the literature. Maybe because it -again- just makes sense?