Vanovo Ltd.has purchased several companies in the retail sector.Recently,Vanovo purchased both a coffee and donut chain (that also owned bakeries)and a submarine sandwich chain.Unfortunately,the planned synergies between these two retail chains did not arise.What effect would this have on the financial statements of Vanovo Ltd. ,the parent company?

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When companies are acquired, the acquiring company records the purchase price as an increase to its fixed assets and goodwill. However, if the planned synergies do not arise, there is a risk that the acquired companies are not performing as well as originally anticipated. This could result in impairment of the fixed assets and goodwill, which would need to be reflected on the financial statements in the form of an impairment charge.