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level: Level 2

Questions and Answers List

level questions: Level 2

Question	Answer
date which is the date the acquirer obtains control of the acquiree	acquisition date
Required method of accounting for a business combination	acquisition method
Approaches a business combination from the perspective of the acquirer	acquisition method
Accounting procedures for a business combination	1. identify the acquirer 2. determine the acquisition date 3. calculate the fair value of the purchase consideration transferred 4. recognize and measure the identifiable assets and liabilities of the business. if the acquirer gains control by purchasing less than 100% of the acquired entity, the 4th step includes measuring and recognizing the non controlling interest. this applies in the stock acquisition 5. recognize and measure either goodwill or gain from a bargain purchase
T/F: One of the combining entities doesn't have to be identified as the acquirer	False, one of the combining entities should be identified as the acquirer
T/F: In the event that the overriding principle of 'control' in PFRS 3 does not conclusively determine the identity of the acquirer, PFRS 3 provides additional guidance	True
T/F: Acquisition date does not depend on the date the acquirer receives physical possession of the assets acquired or actually pays out the consideration to the acquiree	True
In time when the net assets of the acquired company become the net assets of the acquirer	acquisition date
T/F: Business combination does not occurs at the date of the assets or net assets are under the control of the acquirer	False, Business combination occurs at the date of the assets or net assets are under the control of the acquirer
The use of ------- in determining the acquisition date ensures that the substance of the transaction determines the accounting rather than the form of the transaction	control
T/F: Any profits reports as a result of the acquiree's operation within the business combination should reflect profits earned before the acquisition date	False, Any profits reports as a result of the acquiree's operation within the business combination should reflect profits earned after the acquisition date
Calculated as the sum of acquisition date fair values of: □ The assets transferred by the acquirer □ The liabilities incurred by the acquirer to former owners of the acquiree □ The equity interest issued by the acquirer	Consideration transferred