Hello,

Today i have to do a presentation about The facts and the issues about the case in the attachment. My part is writing about the facts and issues and presenting it for 5-10 minutes. And it requires for me to explain everything about it like how and why and summery. The due time is after 5 hours. Here is the facts and issues i need to talk about in the PDF file in slide #10.`

Thank you

COMMITMENT TO SHARE By: Tony Portelli, Ali Terrill and Tamer Abuswaid WHO IS BUYCO? Privately held company Technology developer and manufacturer in the transportation industry BuyCo wants \"the goods\" from SellCo BuyCo also assumes certain liabilities from SellCo TERMS OF THE CASE Asset Purchase Stock Purchase BuyCo is able to specify the liabilities they are willing to assume Buyer purchase stock and assumes all liabilities, including unknown or uncertain SellCo's assets would need to be re-titled to BuyCo No re-titling due to owning entire business entity Goodwill can be amortized by BuyCo for tax purposes Can qualify as a tax-free reorginization BENEFITS OF INTANGIBLE ASSETS Value of intellectual property Amortization LIQUIDITY EVENT What is it? Exit Strategy How? IPOs and acquisition by another copmany Why? Rate of Return Venture Capital CONTINGENT CONSIDERATION Obligation of the acquiring entity to transfer additional assets or equity interests to the former owners of an acquiree. ASSET APPROACH What will it cost to produce another business that will produce the same economic benefits? MARKET APPROACH What are other businesses worth that are similar to my business? INCOME APPROACH The value of an asset is based on the return the assets are expected to provide during the times that it is owned. FACTS & ISSUES Facts Certain assets & liabilities of SellCo were purchased by BuyCo $2M Cash + 10M shares of Common Stock + Assume 4.5M in liabilities Fair Value of BuyCo stock was 1.95 on Dec, 31 X1 x 10M = 19.5M Share Value Commitment valued at $450,000 Q1: TOTAL CONSIDERATION CASH $2 Million SHARES $1.95 x 10M =19.5M Share Value Commitment LIABILITIES $4.5 Million $2 Million $20M in Common Stock $4.5 Million Total Consideration = 26.5 Million ASC 805-30-30-7 Q2: PUTTING IT ON THE BOOKS ASC 480-10-25-14 Q3: JOURNAL ENTRIES Dr. Net Income Cr. Contingent Consideration Liability Fair Value of Share Value Commitment Dec 31, 20X1 = $450,000 June 30, 20X2 = $1.2 M Difference to Book = $750,000 ASC 805-30-35-1 THE END Case 16-9c: Commitment to Share Page 1 Case 16-9 Commitment to Share BuyCo is a privately held technology developer and manufacturer in the transportation industry. On October 31, 20X1, BuyCo entered into an agreement with SellCo to purchase certain assets and assume certain liabilities of SellCo (the \"Transaction\"). BuyCo intends to incorporate the processes, economic resources, and technology acquired in the Transaction into its existing business to serve the transportation industry with energy-efficient solutions and provide a return to its shareholders. The assets and liabilities acquired meet the definition of a business as defined in ASC 805-10, Business Combinations: Overall. Pursuant to the agreement, BuyCo will transfer to the owners of SellCo cash of $2 million and 10 million shares of BuyCo common stock. BuyCo will also assume liabilities of $4.5 million. The terms of the agreement define the \"liquidity event period\" as the period beginning at the closing of the Transaction and ending on December 31, 20X2. If BuyCo undergoes an IPO during the liquidity event period, and the 10 million shares received by SellCo in the Transaction have a fair value of less than $20 million, BuyCo would be required to issue up to 2 million additional shares of common stock such that the total fair value of shares held by SellCo equals $20 million (the \"Share Value Commitment\"). BuyCo would have sufficient authorized and unissued shares to settle the Share Value Commitment, and BuyCo would be permitted to settle in unregistered shares. The agreement requires the Share Value Commitment to be settled in shares and under no conditions will BuyCo be required to settle the Share Value Commitment in cash. BuyCo has concluded that it is more likely than not that the number of shares required to settle the Share Value Commitment will be less than 2 million. The Transaction closed on December 31, 20X1, at which time BuyCo legally obtained control over the purchased assets and assumed liabilities of SellCo. The fair value of BuyCo common stock was $1.85 per share on October 31, 20X1, $1.95 per share on December 31, 20X1, and $1.90 per share on June 30, 20X2. BuyCo hired Entity E, a third-party valuation specialist, to determine the fair value of the Share Value Commitment. On the basis of the current fair value of BuyCo common stock, the guaranteed value of $20 million, the probability of an IPO occurring during the liquidity event period, and other relevant valuation assumptions, Entity E estimated the fair value of the Share Value Commitment to be $1.4 million, $450,000, and $1.2 million on October 31, 20X1, December 31, 20X1, and June 30, 20X2, respectively. Required: 1. What is the total consideration transferred by BuyCo in the Transaction, and how should that consideration be measured? 2. How should the Share Value Commitment be reflected on the December 31, 20X1, balance sheet of BuyCo? 3. What journal entries, if any, are required to record the change in fair value for the Share Value Commitment between December 31, 20X1, and June 30, 20X2? Copyright 2014 Deloitte Development LLC All Rights Reserved. Transferred assets and liabilities constituted of cash, additional shares and assumed liabilities. The value of cash is estimated to $2 million and 10 million shares of common stock for which the fair value is $1.95M. Given that there were additional shares of 10 million shares, the total common shares amounted to $19.5M. The Company assumed liabilities amounted to $4.5 M. This is as a result of IFRS 3 requirement which calls for re-measurement of the company assets and liabilities in fair value at the date of acquisition. The liabilities rather contingent considerations have to be recognized at fair value even if payment is not probable at the date of acquisition. Journal entry for this acquisition involves debiting net income and crediting contingent liability considerations. In accounting, the two sides of the balance sheet must balance the assets and liabilities at the date of acquisition. Considering Dec 31, 20X1, the value of share commitment is $450,000 whereas on June 30, 20X2 the value amounted to $1.2 million resulting into a book difference of $750,000. To settle the $26.5 million shares, the Company used authorized and unissued shares. Transferred assets and liabilities constituted of cash, additional shares and assumed liabilities. The value of cash is estimated to $2 million and 10 million shares of common stock for which the fair value is $1.95M. Given that there were additional shares of 10 million shares, the total common shares amounted to $19.5M. The Company assumed liabilities amounted to $4.5 M. This is as a result of IFRS 3 requirement which calls for re-measurement of the company assets and liabilities in fair value at the date of acquisition. The liabilities rather contingent considerations have to be recognized at fair value even if payment is not probable at the date of acquisition. Journal entry for this acquisition involves debiting net income and crediting contingent liability considerations. In accounting, the two sides of the balance sheet must balance the assets and liabilities at the date of acquisition. Considering Dec 31, 20X1, the value of share commitment is $450,000 whereas on June 30, 20X2 the value amounted to $1.2 million resulting into a book difference of $750,000. To settle the $26.5 million shares, the Company used authorized and unissued shares