Business Combinations Flashcards
Legal Merger/Consolidations Journal Entry
Assets Received
- —-Liabilities Assumed
- —-Consideration given
Legal Acquisition Journal Entry
Investment in Subsidiary
———-Consideration Given
How to account for costs related to acquisition
Expense as incurred
What does not count as acquisition
- joint venture
- acquisition of assets that don’t constitute business
- combination between entities under common control
- combination between not for profit entities
Time Limit for Acquisition Method
Cannot be more than a year
Equity as a contingent consideration
Remember does not cause a gain or loss since its EQUITY
Intangible Assets on the books of an acquired entity right before combination
Recognized by acquiring entity if they provide future benefits
Business Combinations & Leases
Least likely to be reconsidered since the contract is already established
Post acquisition accounting - what would use it
Contingency based assets
Disclosure requirements about goodwill recognized in a business combination
- A quantitative description of the factors that make up the goodwill.
- The amount of goodwill that is expected to be deductible for tax purposes.
- The amount of goodwill allocated to each reportable segment.
Retained Earnings when you consolidate into a new company
At the beginning it is 0 since its a new company
Registration and issuance costs for the common stock
They reduce APIC
Goodwill when you consolidate into a new company
0 since its a new company
IFRS & contingent assets
Not recognized by IFRS but recognized under GAAP if they meet certain requirements
Information about company you are buying is incomplete at acquisition date
The items should be recorded at a provisional amount measured at the date of acquisition
