A137 Wk1

Front

What is the primary difference between a business combination and an asset purchase?
A) Business combination involves buying a going concern; asset purchase involves buying individual items.
B) Business combination is always paid in cash; asset purchase is paid in shares.
C) Business combination is governed by PFRS 16; asset purchase is governed by PFRS 3.
D) There is no difference; they are accounted for the same way.

Back

A) Business combination involves buying a going concern; asset purchase involves buying individual items.
Explanation: PFRS 3 applies to business combinations where an integrated set of activities (a business) is acquired. Asset purchases are accounted for under PFRS 16 or other standards.

Front

Charizard Co. acquires the operating assets and processes of Pikachu Ltd. This is an example of:
A) Acquisition of assets
B) Business combination
C) Merger
D) Joint venture

Back

B) Business combination
Explanation: The acquisition of an integrated set of activities (inputs, processes, outputs) qualifies as a business combination under PFRS 3.

Front

On January 15, Bulbasaur Inc. signed a binding agreement to acquire Squirtle Co. When is the agreement date?
A) January 15
B) The date control is obtained
C) The date of public announcement
D) The date of payment

Back

A) January 15
Explanation: The agreement date is when a binding sale and purchase agreement is signed (PFRS 3).

Front

The most critical date for accounting recognition in a business combination is:
A) Agreement date
B) Announcement date
C) Acquisition date
D) Settlement date

Back

C) Acquisition date
Explanation: The acquisition date is when control is obtained, and it triggers fair value measurement and consolidation under PFRS 3.

Front

Mewtwo Corp. acquired Psyduck Ltd. on November 1, 2024. By when must Mewtwo finalize provisional fair value adjustments?
A) December 31, 2024
B) November 1, 2025
C) Within 6 months
D) Whenever management decides

Back

B) November 1, 2025
Explanation: The measurement period cannot exceed one year from the acquisition date (PFRS 3.45).

Front

Jigglypuff Enterprises paid ₱5,000,000 cash and issued shares worth ₱3,000,000 to acquire Snorlax Co. How is the consideration measured?
A) At settlement date
B) At agreement date
C) At acquisition date
D) At announcement date

Back

C) At acquisition date
Explanation: The fair value of consideration transferred is measured at the acquisition date (PFRS 3).

Front

Which of the following best describes a business under PFRS 3?
A) A collection of assets
B) A single piece of equipment
C) An integrated set of activities capable of generating outputs
D) A legal entity only

Back

C) An integrated set of activities capable of generating outputs
Explanation: PFRS 3 defines a business as an integrated set of activities and assets capable of providing a return to investors.

Front

Gengar Ltd. buys a factory building, machinery, and patents from Machop Inc. but not its workforce or processes. This is likely:
A) A business combination
B) An asset purchase
C) A merger
D) An equity investment

Back

B) An asset purchase
Explanation: Acquiring only assets without an integrated set of activities is an asset purchase (PFRS 16).

Front

The measurement period adjustments are applied:
A) Prospectively
B) Retroactively as of the acquisition date
C) At the end of the reporting period only
D) When cash is paid

Back

B) Retroactively as of the acquisition date
Explanation: Adjustments are made retrospectively as if known at the acquisition date (PFRS 3.45).

Front

Raichu Co. acquired Meowth Ltd. on June 30, 2024. Raichu’s year-end is December 31. In its December 31, 2024 financial statements, Raichu should:
A) Ignore the acquisition until 2025
B) Use provisional fair values with disclosures
C) Use historical cost of Meowth’s assets
D) Not consolidate Meowth

Back

B) Use provisional fair values with disclosures
Explanation: If within the measurement period, provisional fair values are used with appropriate disclosures (PFRS 3).