Biometrics distributors have entered a new phase in the business cycle and are now focusing on acquiring and selling intangible assets. It is no longer sufficient to simply purchase assets from a manufacturing facility or by contract. The company’s growth and success come from utilizing its existing resources and developing more customer base. This means that it is time for a change in how the distribution system works.
To understand what is meant by an accounted for as a business combination, you need to look beyond the balance sheet to the tangible assets. In the process of buying and selling assets, one must take into account the cost of acquiring the assets, any lease payments associated with the assets and any accumulated depreciation. Once all of this information is assessed, the distributors now need to add the cost of acquiring the intangible assets and assume liabilities. This represents the difference between the total purchase price and the net purchase price, less any lease payments or depreciated value. The difference is known as an accounted for as a business combination.
If the assets acquired were property, the distributors now need to include the property in the consolidated statement of operations for the year ended December 31, inclusive of any lease payments. They will also need to include the depreciated value of the property at the time of the acquisition. The depreciated value is determined by adding the replacement costs to the fair market value of the property. For assets such as inventory, the distributors now have to include the inventory volume at the end of the reporting period and then appropriately deduct the amount of inventory discounts to the retail price to determine an appropriate retail price.
If the bioethics distributor did not include the gross sale price of the business combination in the balance sheet, he or she will be required to provide an explanation as to why the value was not provided. This is referred to as the deficiency cost. The failure to provide an explanation as to the deficiency cost will result in a failure to comply with the requirement in Regulation S-K(Regulation D). Regulation D is very specific about what the biometrics distributor must do to be in compliance with this rule. It is important that a bioethics distributor not become dependent on revenues generated from sales of materials outside of the health care industry. The failure to comply with this requirement could result in a penalty in violation of Regulation D.
If a bioethics distributor fails to include the fair market value of the intangible assets used in the business combination, he or she will be required to include the depreciated value of those assets. The failure to comply with Regulation D will also result in a penalty in violation of Regulation D. The failure to provide an explanation as to why the depreciated value was not provided may result in a penalty in violation of Regulation D. The failure to comply with Regulation D will also result in a penalty in violation of Regulation D.
The bioethics distributor’s obligation to determine the fair market value and the corresponding acquisition price is based on the fair market value of the total assets at purchase, less the amount of depreciated or surplus value that is included in the purchase price. If the total assets at purchase are greater than the fair value of the total assets at purchase, the bioethics distributor is required to provide an explanation as to why the excess amount was not included in the purchase price. Failure to comply with Regulation D will result in a penalty in violation of Regulation D. Failure to comply with Regulation D will also result in a penalty in violation of Regulation D.
If the bioethics distributor failed to provide a proper analysis of the business’s potential for future growth, a failure to provide an estimate of the implied value of the customer-related intangible assets acquired will also result in a penalty in violation of Regulation D. In addition to providing an analysis of the anticipated growth in sales and the gross margin for the business, the bioethics distributor must provide an estimate of the customer-related intangible assets. This includes an estimate of the gross value of all customer contracts that were previously signed but have not been terminated. A penalty in violation of Regulation D will be assessed if the bioethics distributor fails to provide an appropriate explanation as to why the previously signed contracts were not terminated. Failure to provide an explanation as to why the customer contracts were not terminated will also result in a penalty in violation of Regulation D.
A bioethics distributor must identify the acquisition method used to determine the value of total assets acquired. If the method utilized does not adequately address the importance of good faith considerations, a penalty in violation of Regulation D will be assessed. A failed to identify the acquisition method will result in a penalty if the distributor attempts to determine the value of total assets by other means not specifically described in the regulations. In addition to the penalties described above, failure to comply with the regulations by identifying acquisition methods will result in a license suspension and/or a fine. Failure to comply with these laws can result in the suspension or refusal to issue credit to the distributor.