How should you capitalize an acquisition and report your balance sheet??

[weijian]

For this specific case, my guess is because the target, CXP was already a subsidiary of PanUnited. As you can see from the press release, this transaction involved an increase in stake from 51.3% to 85.5%.

As CXP is a subsidiary and its valuation is already recorded on PanUnited's balance sheet, PanUnited has to take an impairment loss as the acquisition price is much higher than what it records on its books. This impairment is entirely an accounting loss. One can relatively infer that Mgt is relatively conservative on its books.

I am not well versed enough in accounting to know whether PanUnited can take the other option (ie. re-value its existing stake to book an accounting profit with the acqusition).