Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Question
Chapter 1, Problem 1.2.4E
To determine
Business combination
Business combination refers to a transaction by a which a company acquires majority of shares some other existing company and obtains the control of other company.
To choose:The correct option out of four given options.
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In a business combination, an acquirer's interest in the fair value of the net assetsacquired exceeds the consideration transferred in the combination. Under PFRS3 Business Combinations, the acquirer should
A. reassess the recognition and measurement of the net assets acquired and theconsideration transferred, then recognize any excess immediately in othercomprehensive income
B. recognize the excess immediately in other comprehensive income
C. recognize the excess immediately in profit or loss
D. reassess the recognition and measurement of the net assets acquired and theconsideration transferred, then recognize any excess immediately in profit or loss
In a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under PFRS 3 Business Combinations, the acquirer should
A. recognize the excess immediately in profit or los
B. recognize the excess immediately in other comprehensive income
C. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income
D. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or loss
BUSINESS COMBINATION
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Chapter 1 Solutions
Advanced Financial Accounting
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.7QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10Q
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.16QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.2CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.6CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Multiple-Choice Questions Involving Account...Ch. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Balances Reported Following Combination Palm...Ch. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Acquisition in Multiple Steps Peal Corporation...Ch. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Computation of Account Balances Saspro Division is...Ch. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
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Similar questions
- Which of the following statements is true regarding the acquisition method of accounting for a business combination? a. Assets of the acquired company are recorded at book values. b. Assets of the acquired company are recorded at fair value, but only if the acquisition cost equals or exceeds fair value of the subsidiary's net assets. c. Assets of the acquired company are recorded at fair values regardless of the acquisition cost. d. Consulting costs related to the combination reduce additional paid-in capital.arrow_forwardUnder PFRS 3, when is a gain recognized in consolidating financial information? a. In a combination created in the middle of the fiscal year b. In an acquisition when the value of all assets and liabilities cannot be determined. c. When any bargain purchased is created d. When the amount of a bargain purchase exceeds the value of the applicable liability held by the acquired company.arrow_forwardWhich of the following statements regarding the accounting for business combinations is false? Review Later The acquirer in a business combination will anly recognize the labilities assumed if they meet the definition of liabilities and are part of the business combination transaction. Under the acquisition method, the identifiable assets acquired during a business combination are measured at their acquisition- date fair values. Goodwill is the difference between the consideration transferred by the acquirer to the acquiree and the fair value of identifiable assets acquired. The identifiable assets acquired, liabilities assumed, and noncontrolling interest in the acquiree are recognized separately from the goodwill arising out of a business combination.arrow_forward
- S1: Under the acquisition method, if the fair values of identifiable net assets exceed the value implied by the purchase price of the acquired company, the excess should be accounted for goodwill. S2: With an acquisition, direct and indirect expenses are considered a par of the total cost of the acquired company. Both statements are Only S1 is Only S2 is Both statements are 2. Following the completion of a business combination in the form of a statutory consolidation, what is the balance in the new corporation’s Retained earningsaccount? The acquirer retained earnings accountbalance Thesum of the acquirer and acquiree retained earnings account The acquiree retained earnings accountbalance Zero 3. S1: The acquisition-related costs in a business combination to be expensed immediately include cost of issuing debt securities. S2: In a business combination any “gain on bargain purchase” shall be recognized in other comprehensive income. Only S2 is Both statements are Both statements…arrow_forwardStatement 1: In the financial settlement of a contingent consideration classified as financial liability, the amount shall be remeasured at fair value with any gain or loss included in profit or loss. Statement 2: If a new entity is formed to issue equity interests to effect a business combination one of the combining entitites that existed before the combination shall be identified as the acquirer. Which statement/s is TRUE?arrow_forwardWhich of the following is not considered in the determination of Total Assets after business combination? Group of answer choices a.Book value of the acquirer’s total assets. b.Fair value of the acquiree’s total assets. c.Expenses that are actually paid in relation to business combination d.Contingent considerationarrow_forward
- 1 Which of the following is a characteristic of a business combination that should be accounted for as an acquisition? Group of answer choices a. The combination must involve the exchange of equity securities only. b. The transaction may be considered to be uniting of the ownership interest of the companies involved. c. The transaction establishes an acquisition fair value basis for the company being acquired d. Two companies may be about the same size and it is difficult to determine the acquired company and acquiring company.arrow_forwardWhen an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation? Select one: a. Dr Asset, DR Gain on sale b. Dr Gain on sale, CR Asset c. Dr Gain on sale, CR Cash d. Dr Asset, CR Casharrow_forwardWhich of the following is/are true regarding goodwill achieved through acquisition as part of business combination? Where the acquirer was able to purchase the business at a discount, the excess of the market capitalization over the consideration transferred will be recognized in profit or loss. The acquirer shall recognize goodwill as of the acquisition date measured as the excess of the aggregate of the consideration transferred over the net of the fair values of all the assets acquired and the liabilities assumed Group of answer choices Both statements are true. None of these statements are true. 2 only. 1 only.arrow_forward
- 3. X transfers a publicly traded marketable equity security to Y with a date-of transfer price equal to $25. For each of the following transfer provisions [considered independently], identify the affected condition (#1, 2 or 3) for sale accounting and whether the provision prevents sale accounting for the transfer. A) A legal letter included a "would" opinion stating that the security would be beyond the reach of the powers of a bankruptcy trustee of X. Thus, the transferred asset is isolated from X. B) Y may sell the security to a third party. In the event when X exercise a call option to buy back the security, Y may purchase the same security from the open market as a replacement. C) X writes a put to Y, having an exercise price of $29 (Giving Y the right to sell at $29). The asset price is unlikely to rise beyond $28.arrow_forwardA bargain purchase arises when the price paid to acquire a controlling interest in another company is less than the acquirer’s share of the fair value of net assets of the company being acquired. At the end of your preliminary analysis, you believe that a business combination results in a bargain purchase. What is your next step? A. Recognize an immediate gain in the consolidated statement of profit and loss without further analysis. B. Recognize a liability in the consolidated balance sheet. C. Contact the acquiree to confirm its intention. D. Reassess each step of your analysis to confirm your preliminary findings.arrow_forwardWhich of the following statements is true? Multiple Choice The pooling of interests for business combinations is an alternative to the acquisition method. The purchase method for business combinations is an alternative to the acquisition method. Neither the purchase method nor the pooling of interests method is allowed for new business combinations. Any previous business combination originally accounted for under purchase or pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations. Companies previously using the purchase or pooling of interests accounting method must report a change in accounting principle when consolidating those subsidiaries with new acquisition combinations.arrow_forward
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