Pearl Corporation bought Noodle Bowl Limited at the end of the fiscal year. While negotiating the purchase price, Pearl’s management team referred to the following three recent appraisals from independent valuation consultants. Appraised Value Appraisal Method
Noodle Bowl brand name $50 million Cash flow model based on observed royalty rates
Noodle Bowl workforce $40 million Estimate of the replacement cost to recruit and train an equivalent workforce
Favorable lease agreements $20 million Cash flow model of the anticipated savings from Noodle Bowl's favorable (below market) $20 million contractually guaranteed rental rates for retail space

Required:

Which of the above intangibles is likely to be recorded as a distinct identiflable asset in Pearl Corporation's consolidated financia statement? Which is likely to be recorded as part of goodwill? Explain your reasoning.

Identifiable Asset is the one which can be separated from the business and can be identified separately. The asset should have the capability to be disposed of individually. Favorable lease agreements are one such asset which qualifies these conditions. Thus, Favorable lease agreements should be recorded as a distinct asset in Pearl Corporation's consolidated financial statement.

Every such asset which cannot be identified separately should be recorded as goodwill. We cannot recognize Noodle Bowl workforce and Noodle Bowl brand name as a distinctive asset. Thus, they both should be recorded as a part of goodwill.

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