What were the intangible assets in Yahoo’s purchase of Tumblr?

yahooYahoo purchased Tumblr, a blog-hosting website, in May 2013 for approximately $990.2 million.  The fair values of the net tangible assets and identifiable intangible assets acquired from Tumblr were as follows (in millions):

Cash  $       16.6
Other tangible assets           74.0
Identifiable intangible assets:
    Developed technology           23.7
    Customer contracts         182.4
    Trade name           56.5
Total fair value of assets acquired  $    353.2

Yahoo also assumed the liabilities of Tumblr, which totaled $113.8 million.  Subtracting the liabilities of $113.8 million from the total fair value of identifiable assets acquired of $353.2 million results in a net value of identifiable assets purchased of $239.4 million.

Yahoo paid approximately $990.2 million for Tumblr, yet the identifiable assets acquired in the deal totaled just $239.4 million.  The difference between the purchase price and the net value of the realizable assets acquired is $750.8 million.

The 10-Q that Yahoo filed the quarter in which it acquired Tumblr can be found here.

Questions

  1. What amount of goodwill will Yahoo recognize from this transaction?
  2. Which intangible assets in the purchase of Tumblr can be amortized by Yahoo?
  3. Why would Yahoo be willing to pay $750 million more than the value of Tumblr’s identifiable assets?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. †Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. †The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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