Food for thought: (I don't know if this first paragraph is going to impact the answer)

Allfoods Corp. (Allfoods) is a calendar year-end company. On February 1, 2009, Allfoods announced that it was acquiring 80 percent of the outstanding common stock of Baked Beans Corp. (Baked Beans) in a business combination. On the acquisition date, Allfoods paid $40 million in cash and issued two million shares of Allfoods common stock to the selling shareholders of Baked Beans. All of the outstanding stock options granted to employees of Baked Beans will be replaced with Allfoods stock options as required by the merger agreement. Allfoods is accounting for the transaction in accordance with ASC 805, Business Combinations.

3. Valuation of Intangible Assets The in-process research and development (IPR&D), which is proprietary food freezing technology submitted for Food and Drug Administration (FDA) approval, has a fair value of $15 million. The company considers its R&D to be in-process because it has not yet obtained FDA approval and additional R&D may be required. Allfoods management has determined that the fair value of the Baked Beans trademark is $3 million, using a market participants viewpoint. Management has also determined that it will not use the trademark because it intends to distribute the Baked Beans products under the Allfoods trademark. Management has also determined that it will not sell the trademark because it believes that this could potentially result in new participants entering the market, thus reducing its market share. No amounts were recorded in the balance sheet of Baked Beans for the research and development costs related to their proprietary freezing technology. The trademark has a carrying value of $2 million in Baked Beans financial statements related to costs that it incurred in purchasing the trademark.

• What fair values should be recorded for the intangible assets as part of the acquisition accounting?

This question deals with two (possible) intangible assets. For each of these (i.e., the In-Process R&D and the Patent) you should provide two alternatives.