Should navinow account for the contingent payments promised

Reference no: EM13124004

NaviNow Company agrees $20 million in cash to the four former owners of TrafficEye for all of its assets and liabilities. These four owners of TrafficEye developed and patented a technology for real-time monitoring of traffic patterns on the nations top 200 frequently congested highways. NaviNow plans to combine the new technology with its existing global positioning systems and projects a resulting substantial revenue increase.

As part of the acquisition contract, NaviNow also agree to pay additional amounts to the former owners upon achievement of certain financial goals. NaviNow will pay $8 million to the four former owners of TrafficEye if revenues from the combined system exceed $100 million over the next three years. NaviNow estimates this contingent payment to have a probability adjusted present value of $4 million.

The four former owners have also been offered employment contracts with NaviNow to help with system integration and performance enhancement issues. The employment contracts are silent as to service periods, have nominal salaries similar to those of equivalent employees, and specify a profit sharing component over the next three years (if the employees remain with the company) that NaviNow estimates to have a current fair value $2 million. The four former owners of TrafficEye say they will stay on as employees of NaviNow for at least three years to help achieve the desired financial goals. Should NaviNow account for the contingent payments promised to the former owners of TrafficEye as consideration transferred in acquisition or as compensation expense to employees?

Reference no: EM13124004

Questions Cloud

Determining proofs in linear algebra : Please prove the following theorem: A system of linear equations has zero, one or infinitely many solutions; there are no other possibilities.

Determine average number of people waiting in line : Customers arrive at an automated coffee vending machine at a rate of 4 per minute, following a Poisson distribution. What is the average number of people waiting in line?

Systems of equations and inequalities : Timmy enjoys playing old-fashioned video games. He found 3 game systems on eBay and wants to purchase a Nintendo game system, an Atari game system, and a Sega arcade game system.

Give the solution to isomorphism : Let H be a group and tau_1 : H ---->G_1, tau_2 : H ----> G_2, ... , tau_n : H -----> G_n homomorphism with this property: whenever G is a group and g_1 : G ---->G_1, g_2 : G ----G_2, ..., g_n : G ----> G_n are homomorphism

Should navinow account for the contingent payments promised : NaviNow Company agrees $20 million in cash to the four former owners of TrafficEye for all of its assets and liabilities. These four owners of TrafficEye developed and patented a technology for real-time monitoring of traffic patterns on the natio..

Determining statement in linear algebra : Let ubar and vbar be nonzero vectors in 2 or 3 space and let k=||u|| and m=||v||. Show that the vector Wbar=mubar +kvbar bisects the angle between ubar and vbar.

Determine the mass of ethyl butanoate produced : C2H5OH(l) + C3H7COOH(l) C3H7COOC2H5(l) + H2O(l) Determine the mass of ethyl butanoate produced if 3.30 mol of ethanol is used.

How many standard deviations it exceed average score : The scores on a scholastic achievement test were normally distributed with mean 520 and standard deviation 94. (a) If your score was 700, by how many standard deviations did it exceed the average score?

Find the reaction function and how much does firm produce : Compute CS ,PS and the deadweight lossD)if firm 1 and 2 leaders and 3 follower (Stackelberg),What are the quantity choices for all three firms?

User Account

All Pages