Research On Initial Measurement Of Goodwill For Reverse Merger

At present, the application procedures of IPO listed are still complicated, and time-consuming. Many small and medium enterprises have chosen the reverse merger in order to quickly reach the public financing purposes because its procedures are less restrict. With the increasing reverse mergers, there are still many problems of goodwill measurement on reverse mergers in practice. Most companies will make that the transaction is consistent with criterion of equity transactions. This article is the research of the initial goodwill measurement of the reverse mergers, and hopes to provide some suggestions and comments for it.Some scholars make some researches reverse mergers, mainly focus on the financial effects on choosing different accounting treatment on reverse mergers.But in this paper; it uses comparisons of the accounting standards as well as case studies. It closely combines the practical situation of reverse mergers.First; it gives a brief introduction of the concepts of reverse mergers and goodwill. Second, it makes comparisons of CAS20, SFAS141-142and IFRS3on goodwill measurement of reverse mergers in order to find their differences and our weakness. Finally, it uses cases to show the situations of goodwill measurement on our reverse merger in practice and make some case analysis and explanations.Now in China the value of goodwill on reverse mergers is huge.So lots of companies try not to make the transaction constitute a business. For the transactions that don’t constitute a business, they are not in full compliance with the principles of equity transactions in essence because the value of shell resource contains non-confirmed intangible assets, thus the article suggests we should use the same method to measure the goodwill of transaction whether it constitutes a business or not.The method is the purchase method. For reverse merger which includes a business, the value of goodwill will become bigger because of uninformed intangible assets The lack of practical guide of "business" and "fare value" make the enterprises have the possibility to choose different accounting treatments. So the article put forward some practical guide of "business" based on international accounting standards. Besides how to better use the fair value on initial goodwill measurement of reverse mergers is related to the setting up of our fair value market. This article also gives some suggestions. All in all our bodies of standard setting should speed up making some specific norms of business and fair value to avoid abuse of equity transactions and correctly reflect the value of goodwill on reverse mergers. In addition, this article fails to put forward a new measurement method for goodwill measurement of reverse mergers and only make some suggestions on the basis of accounting standards comparisons and case analysis.