Statutory Mergers and Statutory Consolidations

Question 1

Occurs when a corporation and one or more other businesses are brought together as a single entity to carry on the activities of the previously separated enterprises

Answer 1

Business combination

Question 2

Result of the acquiring of control of one or more enterprise by another enterprise, or the union of ownership interests of two or more entities

Answer 2

Business combination

Question 3

Results to automatic consolidation for the current and subsequent periods

Answer 3

Acquisition of Assets

Question 4

When two or more corporations merge into a single entity which shall be one of the constituent corporation

Answer 4

Statutory Merger

Question 5

A. Corp. + B Corp. = A Corp. or B Corp.

Answer 5

Statutory Merger

Question 6

When two or more consolidate and form a new corporation from then on

Answer 6

Statutory Consolidation

Question 7

A Corp. + B Corp. = Z Corp.

Answer 7

Statutory Consolidation

Question 8

Upon consumption, the acquired company ceases to exist as a separate economic, legal, and accounting entity

Answer 8

Acquisition of Assets

Question 9

Acquiring corporation may acquire majority ownership interest of outstanding common stock of control of a corporation

Answer 9

Stock Acquisition (Acquisition of Common Stock)

Question 10

Separate legal entities of each enterprised are preserved or they both continue their legal existence

Answer 10

Stock Acquisition (Acquisition of Common Stock)

Question 11

Financial Statement of P Corp. + Financal Statement of S Corp. = Consolidated Financial Statement of P Corp. and S Corp.

Answer 11

Stock Acquisition (Acquisition of Common Stock)

Question 12

Companies may be viewed as a single reporting entity thus creating the need for consolidated financial statements

Answer 12

Stock Acquisition (Acquisition of Common Stock)

Question 13

What is a business combination?

Answer 13

It is a transaction or event in which an acquirer obtains control of one or more businesses

Question 14

Business combination must involve the acquisition of a business, which generally has what three elements?

Answer 14

Inputs, Process, and Outputs

Question 15

An economic resource that creates outputs when one or more processes are applied to it

Answer 15

Inputs

Question 16

A system, standard, protocal, convention or rule that when applied to an input or inputs, creates outputs

Answer 16

Process

Question 17

The result of inputs and processes applied to those inputs

Answer 17

Output

Question 18

What is the method of accounting of business combinations?

Answer 18

Acquisition Method

Question 19

What does the acquisiton method consists of?

Answer 19

• identifying the acquirer
• determining the acquisition date and consideration transferred
• recognizing and measuring
• recognizing goodwill, or in the case of a bargain purchase, a gain

Question 20

Power to govern the financial and operating policies of an entity so as to obtain benefits from its activities

Answer 20

Control

Question 21

Known as the acquiring corporation

Answer 21

Parent

Question 22

Known as the acquired corporation

Answer 22

Subsidiary

Question 23

Combined entity that obtains control of the other combining entities or business

Answer 23

Acquirer

Question 24

Date on which the acquirer obtains control of the acquiree

Answer 24

Acquisition Date

Question 25

What happens on the acquisition date?

Answer 25

Acquirer legally transfers the consideration, acquires the assets and assumes the liabilities of the acquiree - the closing date.

Question 26

Costs the acquirer incurs to effect a business combination

Answer 26

Acquisition-related costs

Question 27

What are examples of acquisition costs?

Answer 27

finder’s fee; advisory, legal, accounting, valuation and other professional or consulting fees; general administrative costs, costs of registering and issuing debt and equity securities

Question 28

How should the acquirer recognize acquisition-realted costs?

Answer 28

As expenses

Question 29

How should costs of issuing entity instruments be treated?

Answer 29

Reduction in the share capital (debited to APIC/Share Premium)

Question 30

How should “direct costs of combination” be treated?

Answer 30

Expense

Question 31

How should “indirect costs of combination” be treated?

Answer 31

Expense

Question 32

How should “costs to issue and register stock” be treated?

Answer 32

debited to APIC/Share Premium

Question 33

How should “costs to issue debt securities (bonds)” be treated?

Answer 33

Bond issue costs

Question 34

How should the acquirer recognize the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree?

Answer 34

Separately from goodwill

Question 35

How should the acquirer recognize the acquisition-date fair values of contingent consideration?

Answer 35

As part of the consideration transferred

Question 36

How does PFRS 3 require identifiable assets acquired and liabilities assumed to be measured as?

Answer 36

At their acquisition-date fair values

Question 37

Will be best estimates and will need to be adjusted to fair values when those amounts can be determined after the end of the reporting period

Answer 37

Provisional amounts

Question 38

How should the business combination be accounted for if the initial accounting for a business combination can be determined only provisionally by the end of the first reporting period?

Answer 38

Using provisional amounts

Question 39

The measurement period cannot _________ from the acquisition date

Answer 39

exceed one year

Question 40

When does goodwill arise?

Answer 40

Consideration transferred > FV of acquiree’s identifiable assets

Question 41

What is recognized in the profit or loss when a bargain purchase occurs?

Answer 41

Gain on acquisition

Question 42

When does a bargain purchase (gain on acquisition) arise?

Answer 42

Consideration transferred < FV of acquiree’s identifiable assets