Acquisition method of Accounting

Question 1

For the purpose of applying the acquisition method to a business combination, what may constitute a “business”?

Answer 1

A business may be:

1. A group of assets or a group of net assets (that constitute a business);
2. A separate legal entity (that is a business).

Question 2

Because debt-holders do not have voting rights and cannot exercise control over an invested,

Answer 2

the combining entity whose debt-holders have the larger portion of the debt of the combined entity by itself would not indicate that the entity is an acquirer in a business combination.

Question 3

When a new entity is formed to effect a business combination,

Answer 3

a legal consolidation has occurred.