1907004 Informal Interpretation

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Sheinberg, Samuel I.
From:
Sent: 	Thursday, July 11, 2019 11:47 AM
To: 	Walsh, Kathryn E.; Carson, Timothy; Sheinberg, Samuel I.; Six, Anne; Whitehead, Nora;
Olson, Eric
Subject: 	FW: Question re Geographic Allocation of Good Will
From: Berg, Karen E.
Sent: Thursday, July 11, 2019 11:46:49 AM (UTC-05:00) Eastern Time (US & Canada)
To:
Cc:
Subject: RE: Question re Geographic Allocation of Good Will
Goodwill should be allocated according to sales (in/into versus outside the US). So if 80% of Y’s sales were US sales, 80%
of its goodwill is a US asset.
Karen
From:
Sent: Wednesday, July 10, 2019 10:55:11 AM (UTC-05:00) Eastern Time (US & Canada)
To:
Subject: Question re Geographic Allocation of Good Will
Hi everyone,
I have a question about the location of good will: Specifically X is acquiring certain voting shares of Y, a foreign entity
that develops, supports, and licenses cloud‐based software. X is assessing whether the acquisition would be exempt
under Section 802.4. Y did not generate at least $90 million of sales in or into the US in Y’s most recent year. Thus the
issue is determining the fair market value of Y’s U.S. assets.
Y is not incorporated in the US and does not have its principal offices in the US. All of Y’s sales force is located outside
the US. We believe (and are confirming) that the only assets Y has in the US are bank accounts and accounts
receivable. Eighty percent of Y’s total revenues, however, are attributable to customers located in the U.S. The
contracting party with these US customers is Y.
When identifying Y’s U.S. assets for purposes of determining their fair market value, may we take the position that
under these facts Y’s good will is located outside the US? Or does the fact that most of Y’s customers are located in the
US mean that most of Y’s good will is necessarily located in the US?

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