The purpose of FAS 141 and FAS 142 is to provide investors with bet-
ter financial information regarding the success of past acquisitions. In the
process of doing this, the FASB has forced firms to deal with a number of
thorny and, in some cases, unresolved valuation issues:
■ Valuing the reporting unit from the perspective of hypothetical new
buyer or from the perspective of the acquiring firm implementing its
strategy for deploying the acquired assets.
■ Applying a marketability discount to the value of a reporting unit when
the unit no longer has equity trading in a liquid market.
■ Estimating the proper cost of capital when the discounted cash flow
approach is used to value the reporting unit.Valuation and Financial Reports 165