Final answer:
In mergers and acquisitions, reporting units that are acquired must be assigned a value based on their fair market value at the time of the acquisition. This process is known as purchase price allocation, which involves assigning the purchase price to different assets and liabilities of the acquired reporting units.
Step-by-step explanation:
In mergers and acquisitions, reporting units that are acquired must be assigned a value based on their fair market value at the time of the acquisition.
This value is known as the purchase price allocation and it involves assigning the purchase price to the different assets and liabilities of the acquired reporting units.
For example, if a company acquires another company, it may allocate the purchase price between tangible assets such as buildings and machinery, intangible assets such as patents and trademarks, and liabilities such as debt.