UK Accounting Glossary
Method of producing consolidated financial statements (see acquisition method).
A method of accounting for a merger or combination in which one firm is considered to have purchased the assets of the other firm. If the price paid for the acquired firm exceeds the market value of the acquired firm’s assets, the difference is recorded as goodwill on the acquiring firm’s balance sheet. The goodwill must be written off over a period of years.
We used the purchase method as our primary accounting method to record the transactions in our books with regards to the merger.
The accountants calculated the purchase method for the acquisition. They wanted to ensure the acquisition wasn’t going to negatively impact the value of their books.
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This glossary post was last updated: 23rd December 2018.