A RARE CONSENSUSIt surprised me, but for once I don't disagree with columnists Miller & Bahnson! Their article on purchase accounting (Feb. 26-March 18, 2007, page 12) is correct. Coming up with the fair value for the seller's assets and leaving the buyer's assets at historical cost provides only a mish-mash on the new combined balance sheet. Thus, their recommendations for "real basis" accounting, putting both buyer and seller on a full fair value basis, is theoretically sound. Also, it is actually possible to implement. If we can apply SFAS 141 to the seller, there is absolutely no reason why we cannot also apply it to the buyer at the time of a business combination.
So far, so good. The real problem would come in the next year and beyond. Many readers, including your columnists, would then want to have last year's fair values updated in each of the following years for changes in fair value over the previous 12 months.
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