Jones Company obtains all of the common stock of Hudson, Inc., by issuing 50,000 shares of its own stock. Under these circumstances, why might the determination of a fair value for the consideration transferred be difficult?

Question

Business

Dania Burke

2 November, 13:42

Jones Company obtains all of the common stock of Hudson, Inc., by issuing 50,000 shares of its own stock. Under these circumstances, why might the determination of a fair value for the consideration transferred be difficult?

+3

Answers (1)

Know the Answer?

Bruce Gardner · Answer 1

Sometimes it is not easy to determine the fair market value of stocks, for example:

If Jones is a recently created corporation and the 50,000 shares are their IPO. Jones might not be a publicly traded corporation, it might be a closely held corporation so there is no fair market value If the 50,000 shares represent a huge increase in the number of outstanding shares it might cause a great variation in the price Jones's stock might have experienced large fluctuations in recent times etc.