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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
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:
- 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.
In determining the goodwill from the acquisition, Roosevelt had used
- a $500,000 liability for the eviction costs
Should Roosevelt leave these numbers unchanged, or should it re-examine these valuations in light of subsequent events?
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