ABC Quiz 1

Magulang Corporation acquires 50% ownership interest in Musmos Inc. Therefore, under PFRS 3, Magulang Corporation has the control over Musmos Inc.

• TRUE

• FALSE

Magulang Corporation acquires 35% ownership interest in Musmos Inc. There is an agreement with the shareholders of Musmos Inc. that Magulang Corporation will control the appointment of the majority of board of directors of Musmos Inc. This is not a business combination since Magulang Corporation does not have control over Musmos Inc.

• TRUE

• FALSE

Outputs are not required for an integrated set to qualify as a business.

• TRUE

• FALSE

Same with outputs, a set of integrated activities need NOT have liabilities to qualify as a business.

• TRUE

• FALSE

The acquisition date is always the closing date.

• TRUE

• FALSE

PFRS 3 noted that future losses or other costs expected to be incurred as a result of the business combination are liabilities of the acquirer and therefore included in the calculation of consideration paid.

• TRUE

• FALSE

A non-financial asset transferred to the former owners of a newly-acquired company as part of the purchase consideration shall be measured at its carrying amount.

• TRUE

• FALSE

If issuance of stocks will be the consideration to be paid by acquirer, the cost of SEC registration, cost of issuing stock certificates, documentary stamp tax, newspaper publication, professional adviser’s fees, underwriting costs and brokerage fees are to be deducted from Additional Paid in Capital (APIC) or Share Premium first.

• TRUE

• FALSE

The identifiable assets should never include goodwill that may exist on the acquiree’s books. The only goodwill recorded in an acquisition is the “new” goodwill based on the price paid by the acquirer.

• TRUE

• FALSE

An agreement to issue additional shares upon occurence of future event (under contindent consideration) is treated to be a change in estimated value of shares issued. No liability is recorded at the acquisition date.

• TRUE

• FALSE