A Business And Microsoft Is The Primary Beneficiary Of This Business Essay

A Business And Microsoft Is The Primary Beneficiary Of This Business Essay

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1.
a. Though NDS is not a separate company, it’s a business and Microsoft is the primary beneficiary of this business. Microsoft acquired “substantially all” of NDS, in the other word, Microsoft had control over NDS and it bought both NDS’ assets and liabilities. According to ASC Paragraph 805-10-25-01, this transaction qualifies as a business combination. Hence Microsoft should apply acquisition method.
b. Assets and liabilities reported as business combination and purchase can have substantial differences on acquirer’s financial statements. For instance, when Microsoft acquired NDS, it will be able to report some intangible assets. Examples would be technology-based, contract-based, customer-related and marketing-related. Those are identifiable intangible assets that are not reported on the book before and benefit for future development of the Microsoft. In additional, Goodwill is reported when NDS was acquired. Microsoft paid consideration over NDS’s book value, because it expected the acquisition would bring synergies to the company.
2.
a. Phone Hardware segment’s goodwill was impaired.
b. In business perspective, Phone Hardware did not meet the expected sales goal, and lower the margins in total. The changes of marketplace competition are the economic reason for the goodwill impairment.
c. Microsoft must make judgments on estimation of the long-term rate of growth for the business, estimation of the useful life over Phone Hardware segment, and determination of weighted average cost of capital.

d. Technology-based and contract-based is major identifiable intangible assets of the Phone Hardware segment.
Each of these intangible assets has different useful lives. It’s necessary to estimate their fair value to calculate their ...


... middle of paper ...


...p growing in next few years. Therefore, Danske always mentions “net profit before goodwill impairments”, they do not want 2015’s uncertain assumptions impact their financial statements.
9. Danske prepares its financial statements in accordance with IFRS. Under US GAAP, AOCI is a part of balance sheet under stockholders’ equity section. However, under IFRS, Danske can report all of the comprehensive income components that are not reported in other statements under OCI, such as unrealized value adjustments, unrealized gain or loss of AFS
10. Foreign currency translation is used to adjust the difference of goodwill between functional currency and reporting currency after impairment charges. So that goodwill is able to react to rate changes. Foreign currency translation increases or decreases the goodwill balance to revise the carrying amount of goodwill to fair value.

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