Examines the issues of accounting for in-process research and development (IPRD) for an acquisition under purchase method of accounting. Provides information about consolidation and the standards for the definition and treatment IPRD used. Also describes practices that controversy over IPRD accounting in the mid-1990s led. The situation is the acquisition of a small software company (mirabilis) with a very popular Internet software product for instant messaging, but without revenue. The acquirin … Read more »

Examines the issues of accounting for in-process research and development (IPRD) for an acquisition under purchase method of accounting. Provides information about consolidation and the standards for the definition and treatment IPRD used. Also describes practices that controversy over IPRD accounting in the mid-1990s led. The situation is the acquisition of a small software company (mirabilis) with a very popular Internet software product for instant messaging, but without revenue. The acquiring company, America Online, which, it is thought that in the announcement of the takeover to write off a significant amount of the purchase price as IPRD. Shortly after this announcement, the Chief Accountant of the SEC announced that the SEC was concerned about the amount of depreciation. Asks how the CFO of AOL should react and what the impact of the depreciation amount is IPRD its share price on the future of the company and profit.
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from
Mary E. Barth,
David W. Hoyt
Source: Stanford Graduate School of Business
23 pages.
Release Date: 5th December 2000. Prod #: A166A-PDF-ENG
AOL’s acquisition of Mirabilis (A): Accounting for Acquired In-Process R & D HBR case solution

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