Question: Your client, Do the Chop Broadcasting, just purchased property for its station headquarters alongside the Blue Ridge Parkway in North Georgia. The location is at an altitude high enough for uninterrupted signal, and close enough to BraveNation communities in both Georgia and North Carolina, where there are high concentrations of fans. Their listenership is largely a result of the quality signal these mountain communities can receive due to locale.
Your client paid a high price for the property-$1 million above the fair market value of the assets acquired. The president of Do the Chop Broadcasting has made it clear that the reason he agreed to pay this price is for the access to potential markets in both states without landscape interference. Accordingly, he has asked for an account entitled "Airwaves" be set up in the balance sheet and valued at $1 million.
As Do the Chop's CPA, you know you will have to take a position on this issue. Should your firm allow the client to account for the $1 million in the way he suggests? If not, what is your firm's position on how the transaction should be accounted? Write a recommendation to your boss, detailing the position your firm should take with this client, and why
A successful recommendation will:
Demonstrate familiarity with relevant facts and sources
Identify a defendable solution and support it through logical reasoning and established guidelines
Take into account differing views and address potential objections accordingly
Consider ethical factors
Be tactful with respect to the potential client
Use and cite sources correctly
Be error free and concise