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Hi Ida

If the selling company did not want to transfer any liability, they should have cleaned up their balance sheet before the transaction and pass on to the buyer the zero liabilities balance sheet.

You still have 90 days after the transaction date to correct it as per IFRS 2 and seller must accept these corrections. I am not sure how it is treated in US GAAP  though..

If in doubt, you can hire a small audit firm which will review the case and give you detailed instructions how to book it properly. 

Hope it helps 

Thank you

Regards

Gulshat 

Idea, in my experience, in an asset purchase the current assets except for cash, long-term assets, and current liabilities are assumed and recorded.  Long-term liabilities are generally the responsibility of the seller, often paid off at the time of sale so that liens can be released and the underlying collateral transferred to the buyer.  In the asset purchase agreement, there could be exceptions that would override the normal accounting.  For instance, certain fixed assets may be personal in nature and therefore not included in the sale.  

IRS Form 8594 should have been completed at sale and incorporated into the PSA for both parties to use to close and set up books, has to be filed on tax return for year of sale/purchase

Looks to me this is a Liquidation of a company, not an acquisition. So, the buyer of the assets only recieve and record the assets in his/her new company. The selling company is responsible for the liquidation process including settlements for the liabilites.

Hi Ida,

I realize that your question was posted nearly a month ago and see that some of the responses are not quite covering the question that you asked.  There are some nuances depending on the details of the transaction, but in general -------    At the time of acquisition on the acquiring companies side, the acquired assets are recorded at fair market value (presumably a market value assessment was performed in preparation for the sale).  The difference between the purchase price (which would equal your credit to cash and to any liability vehicle used to finance the purchase) and the total asset value would become goodwill unless it could specifically be allocated to intangible assets such as customer lists.  I believe if the purchase price is less than the value of the assets either the assets are adjusted down or equity is recorded but you would have to look that up based on the type of assets you are acquiring. 

Hi Ida,

I know I'm late and I'm guessing that you have this handled, but feel free to contact me if you have any questions. I am a business valuation analyst, and I teach a class at a local university that has an introductory section on fair value for financial reporting. I'd be happy to answer your questions.

Good luck.

Ron