In January 2019, Roosevelt Corporation acquired Stanford Company in a business acquisition. By early April 2019 (almost 3 months from the date of acquisition), the following issues came to light:

1. As part of the acquisition, a piece of property planned for commercial real estate development was valued at $5,000,000. Two months after the acquisition date, it was determined that oil existed under the property. The property value is now estimated to be $10,000,000.

2. Initially, Roosevelt expected to evict existing tenants from the property (see #1) in order to develop it for commercial real estate purposes. The estimated costs of the eviction were $500,000. After the discovery of the oil reserves beneath the property, Roosevelt may not need to evict the existing tenants because of the change in the use of the property.

3. Roosevelt planned to retain the Stanford Companys current CFO after the business acquisition was finalized. However, in early March, Roosevelts management learned that the CFOs long-term secretary had filed a $5,000,000 lawsuit against the company alleging that the CFO had sexually harassed her for several years. The secretary had not disclosed the sexual harassment previously because the CFO had a close personal relationship with the former owners. With the change in ownership, the secretary feels free to reveal the on-going situation to the new owners and management.

In determining the goodwill from the acquisition, Roosevelt had used

• a $5,000,000 value for the land
• a $500,000 liability for the eviction costs
• and nothing for the lawsuit.

Should Roosevelt leave these numbers unchanged, or should it re-examine these valuations in light of subsequent events?