8.5-8.7 Business Combinations Flashcards

1
Q

Business Combinations (IFRS)

A

business combinations are not differentiated based on the structure of the surviving entity

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2
Q

Business Combinations (US GAAP)

A

Merger.
Acquisition.
Consolidation.

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3
Q

Merger

A

The acquiring firm absorbs all the assets and liabilities of the acquired firm

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4
Q

Acquisition

A

Both entities continue to exist in a parent-subsidiary relationship

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5
Q

Consolidation

A

A new entity is formed that absorbs both of the combining companies.

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6
Q

accounting method used for business combinations

A

acquisition method

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7
Q

Balance Sheet Acquisition Method

A

Consolidated with a minority interest

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8
Q

Income Statement Acquisition Method

A

Consolidated subtracting minority share

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9
Q

Full goodwill (required under U.S. GAAP; allowed under IFRS):

A

full goodwill = (fair value of equity of whole subsidiary) − (fair value of net identifiable assets of the subsidiary)

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10
Q

Partial goodwill (only allowed under IFRS):

A

partial goodwill = purchase price − (% owned × FV of net identifiable assets of the subsidiary)

or

partial goodwill = % owned × full goodwill

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11
Q
A
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