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Tom's Tractor Case-Accounting Research

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Tom’s Tractor
Purpose:
The purpose of this memorandum is to reflect the results of our due diligence on researching authorities related to the acquisitions made by Tom’s Tractor Supply Co. and Mills Machines, Inc.’s plans to change their policy of accounting for product recalls. The context of our research associated with these transactions, one undertaken and one planned, are twofold: International standards under IFRS and domestic U.S. standards under U.S. GAAP.
Relevant facts: * Tom agrees to purchase Rural Life Supply Co. for $150 million in exchange for: * Assets of Rural Life Supply Co. that include: * Exclusive supplier contract of farming equipment with Farming Depot and non-contractual customer relationship with Farming Depot for routine purchases of power tools. * Exclusive supplier contract of power tools with Cattle Caller and non-exclusive contract associated with the customer relationship with Cattle Caller for the backlog of orders for farming power equipment. * Tom agrees to purchase Tractor Heaven for $90 million in exchange for: * Assets of Tractor Heaven that include: * Customer lists of Tractor Heaven, half of which contain confidentiality agreements. * Non-contractual customer relationship with Bonanza Farming.
Issue:
What is the appropriate GAAP and IFRS accounting treatment for Tom’s Tractor Supply acquisitions of Rural Life Supply Co. and Tractor Heaven?
Analysis:
Deloitte guidance
FASB ASC-805-20-55-20, 805-20-55-55
**SEC S99-3: At bottom of 805 stds page
Conclusion:
GAAP-Tom’s
The exclusive supplier contracts Tom’s acquired from RLS are identifiable intangible assets, and are accounted for separately from goodwill as prescribed by ASC 805-20-55. Additionally, the non-exclusive, non-contractual customer relationship with Farming Depot acquired by Tom’s is an

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