Full goodwill, partial goodwill, and pooling method: Goodwill, Long-term debt-to-equity ratio

Full goodwill, partial goodwill, and pooling method

in $ millions	Acquirer		Target
	Book value	Fair value	Book value	Fair value
Current assets	9,000	9,000	500	700
Noncurrent assets	7,500	7,800	900	950
	16,500	16,800	1,400	1,650
Current liabilities	3,000	3,000	250	250
Long-term debt	7,700	7,500	400	300
Shareholder's equity	5,800	6,300	750	1,100
	16,500	16,800	1,400	1,650

Acquirer purchased a 60% controlling interest in Target for $900 million (paid with shares of Acquirer's common stock)

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Goodwill

method				Goodwill
Full goodwill				900/60% - 1,100 (identifiable net assets@FV) = 400
Partial goodwill				900 - 1,100 * 60% (pro-rate share of Target's identifiable net assets@FV) = 240
Pooling				0 (*)

(*) Goodwill is not created under the pooling method.

Long-term debt-to-equity ratio

method				Goodwill
Long-term debt				7,700 (Acquirer, BV) + 300 (Target, FV)
Equity				5,800 (Acquirer, BV) + 900 (Acquirer, FV, shares to acquire Target) + 600 (noncontrolling interest) (*)
Long-term debt-to-Equity ratio				8,000/7,300 = 1.0959

(*) Under U.S. GAAP, the noncontrolling interest is based on the full goodwill method.