Cocoa For All Co. (the Company) is a global distributor of cocoa powder that

is registered with the SEC in the United States. The Companys operations are primarily

located in the United States, South America, and parts of Europe. In March 2018, the Company,

looking to refocus efforts to only produce organic cocoa products, entered into an agreement (the Agreement) with Natures Best, an all-natural food distributor in the United States looking to expand its international footprint (the Transaction). Natures Best is registered

with the SEC in the United States. Pursuant to the Agreement, the Company provided a sublicense to Natures Best for the distribution rights of the Companys South American local cocoa brand, GoGo Chocolate, whereby Natures Best will distribute GoGo Chocolate in South America.

Under the Agreement, the Company transferred the existing customer contracts in South America to Natures Best and an at-market supply contract with the producer of GoGo Chocolate. In addition, the Company retained all of its employees and distribution capabilities. The transaction closed on March 1, 2018 (the Closing).

Additional Facts:

Natures Best incurred certain costs to acquire the sublicense of the

distribution rights and a license to use the name GoGo Chocolate. The costs included

legal, accounting, and other professional or consulting fees totaling $50,000.

Natures Best agreed to transfer to the Company $3 million cash for the sublicense

of the distribution rights of GoGo Chocolate. (License to Distribute is assumed to have FMV of $2,270,000, and the Customer Contracts are assigned a FMV of $780,000

Assume both companies have adopted FASB Accounting Standards Update No.

2017-01, Business Combinations (Topic 805): Clarifying the Definition of a

Business.

Required:

1. Does the acquisition of the sublicense (distribution rights) by Natures Best to distribute GoGo Chocolate meet the definition of a business or should it be accounted for as an acquisition of assets? Explain your answer/reasoning/support.

(Hint: examine the guidance in ASC 805-10-55-3 through 55-6, ASC 805-10-23, and ASC 805-50-30-1)

2. How should Natures Best account for the acquisition, including the

treatment of the transaction costs? Provide an example of the journal entry in your answer/presentation.

3. Point out why you chose your answer in #1; especially what points lead you to your decision?

Include all relevant ASCs, FASB updates, etc in your presentation.