Jones co obtains all of the common stock of hudson inc by issuing 50k shares of its own stock. Under these circumstances, why might the determination of fair val for the consideration transferred be difficult?
belongs to book: ADVANCED ACCOUNTING|Debra C.jeter, Paul K.Chaney|7th edition| Chapter number:2| Question number:3
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Accounting
- The shares may be newly issued --> no accurate value has yet been established.
- Jones may be a closely held corporation so that no fair value is available for its shares.
- The number of newly issued shares may cause the price of the stock to fluctuate widely so that no accurate fair value can be determined during a reasonable period of time.
- Jones' stock may have historically experienced drastic swings in price --> a quoted figure at any specific point in time may not be an adequate or representative value for long-term accounting purposes.
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