Business Combinations and Consolidations

Question 1

An integrated set of activiteis and assets that is capable of being conducted and managed for thepurpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to–must qualify as this to qualify for treatment as a business combination

Answer 1

Business–outputs are NOT required to qualify as abusiness

Question 2

If the assets and laibilies acquired do not constitute a business, then the transaction is accounted for as this, and all assets are recorded at amount of cash paid—NO goodwill

Answer 2

Asset acquisition

Question 3

The business that is being acquired

Answer 3

Acquiree

Question 4

The entity that obtains control o the acquiree

Answer 4

Acquirer

Question 5

The date on which the acquirer obtains control of the acquiree

Answer 5

Acquistion date

Question 6

A transaction or event in which the acuirer obtains control of one or more businesses

Answer 6

Business combination

Question 7

A controlling financial interest by ownership of a majority of the voting shares of stock–generally more than 50%

Answer 7

Control

Question 8

The method of accounting used if an acquisition qualifies as abusiness combination

Answer 8

Acquisition method

Question 9

An asset that arises from contractual obligations or legal right, or is separable–if don’t meet this criteria must not be recognized as an asset (i.e. intellectual capital, potential contracts, etc.)

Answer 9

Identifiable asset

Question 10

The part of the acquiree that the acquirer does not own; is measured by using the active market prices on the acquisition date

Answer 10

Noncontrolling interest

Question 11

A business transaction in which control is achieved basedon contractual, onwership or other interests that change with changes in the entity’es net asset value; i.e. control is achieved through arrangements that do not involve ownership or voting intersets

Answer 11

Variable interest entities (special purpose entities)

Question 12

If an entity has a controlling financial interset in a VIE, the entity is considered this and is required to consoidate the VIE in its financial statements

Answer 12

Primary beneficiary

Question 13

Rights that give the holder the ability to remove hte reporting entity who has the power to direct the activites that most signficantly impact the VIE’s economic performance

Answer 13

kickk-out rights

Question 14

Rights taht gvie the holder the ability to block the actions of a reporting enetity with power to direct the activities of the VIE

Answer 14

Partcipating rights

Question 15

The difference between the acquisition cost and the book value of the acquiree’s net assets

Answer 15

Differential

Question 16

The term used to describe financial statemetns prepared for companies that are owned by the same parent company or idnividual–often prepared wehn several subsidiaries of a common paretn are nto consolidated by coming all of hte separeate companies’ financial statements classifications

Answer 16

Combined financial statements

Question 17

Method of accounting used (and required by SEC) to prepare financial statemetns for signficant very large subidiaries that either wholly or substantially (>90%) owned

Answer 17

Push-down accounting