Accounting theory and practice, Volume 2 (of 3) : a textbook for colleges and…

present value of those securities and all costs in connection with their issue should constitute the cost of the building. Determination of the present value of the securities is oftentimes a difficult matter. When sales on the market take place concurrently, that determines the price. When, as is usually the case, several existing companies are bought up or merged to form a larger company, the old stockholders are given shares in the new company for their equities in the old. The book value of their old holdings may be the basis for the issue of the new stock or the issue may be on the basis of a larger or smaller value than this. This whole question of the value of the assets taken over is equally a question of the value of the securities issued therefor. This is considered in full in Chapters XX and XXI and will be given only brief treatment here. Manifestly all considerations relating to buildings purchased by stocks and bonds have equal application to all other fixed assets so purchased, and the treatment in later chapters will therefore be more inclusive than could be any statement of the case applicable only to buildings. It suffices to say here that usually the par value of the securities issued constitutes the value placed on the assets bought. The valuation as a rule is made by an appraisal committee from the board of directors which inspects the various properties taken over and places a value on them. In the absence of fraudulent intent, the courts will usually sanction and uphold these values as having been made by interested parties competent to act. This is the method generally used for injecting water into properties.