Identifiable asset definition
/What is an Identifiable Asset?
An identifiable asset is a separate asset that has been acquired through a business combination, and which is expected to provide a future benefit to the acquirer. These assets are assigned a fair value and recorded in the accounting records of the acquirer. Once the fair values of all identifiable assets and liabilities have been assigned, the aggregate amount is subtracted from the purchase price paid to the owners of the acquiree; the residual (if any) is recorded as goodwill in the balance sheet of the acquirer.
An asset is considered to be identifiable if it can be separately disposed of. When that is not the case, then by default its value is included in the goodwill associated with the business combination.
Related AccountingTools Courses
Business Combinations and Consolidations
Accounting for Identifiable Assets
The accounting department of an acquiring entity follows a standard procedure to account for identifiable assets. That procedure is as follows:
Identify all assets that may qualify as identifiable assets.
Assign values to these assets, based on their fair market values. An appraiser may be used at this step.
Aggregate these market values and subtract the total from the price paid for the acquiree. The residual is the goodwill asset.
Recognize each of the identifiable assets in the accounting records of the acquirer, along with the goodwill asset.
Begin depreciating the identifiable assets. Also, if management takes the goodwill amortization option, it can begin amortizing the cost of the goodwill asset.
Example of the Accounting for an Identifiable Asset
Starlight Corporation acquires Moonlight Corporation for $5,000,000. As part of the acquisition, Starlight identifies that Moonlight owns a patent that is considered an identifiable asset. After a fair value assessment, the patent is valued at $800,000, while the total of all identifiable assets is $4,300,000. The accounting treatment by Starlight is to record the patent separately from goodwill and other acquired assets, since it is an identifiable asset. The entry is an $800,000 debit to the patent asset account, a $3,500,000 debit to all other asset accounts, a $700,000 debit to the goodwill asset account, and a $5,000,000 credit to the cash account. This is how an identifiable asset (the patent) is separately recognized at its fair value, as required by business combination accounting standards.
Types of Identifiable Assets
Examples of identifiable assets are buildings, computer equipment, machinery, office equipment, and vehicles. Intangible assets can also be considered identifiable assets.