Business Combination

This distinguishes a business combination from other types of investment transactions.

• acquisition of assets

• acquisition of stocks

• obtaining control

• all of these

The entity that obtains control over another business in a business combination is called the

• controller

• acquiree

• acquirer

• controllee

PFRS 3 requires all business combinations to be accounted for using the

• purchase method

• acquisition method

• goodwill method

• control method

According to PFRS 3, the acquisition date is normally the

• control date

• purchase date

• closing date

• valentine's date

Entity A and Entity B combined their business. The acquirer in the business combination is not clearly identifiable. Which of the following is not an indicator that Entity A is acquirer?

• Entity A is the initiator of the business combination.

• Entity A's former owners receive the largest portion of the voting rights in the combined entity.

• Entity A's former management team dominates the management of the combined entity.

• Entity C, a new entity, is formed and Entity C transfers cash to entity A and Entity B.

Which of the following statements is incorrect regarding the consideration transferred in a business combination?

• It includes only those that are transferred to the former owners of the acquiree.

• It includes those that are retained in the combined entity.

• It can be in the form of cash, non-cash assets, the acquirer's own equity instruments, or mixture of these.

• It is measured at fair value.

Direct costs incurred in a business combination are

• capitalized

• expensed

• capitalized, except for cost of issuing equity and debt instruments

• expensed, except for cost of issuing equity and debt instruments

According to PFRS 3, the acquirer measures non-controlling interest in the acquiree

• a.

  at fair value

• b.

  at the non-controlling interest's proportionate share in the acquiree's net identifiable assets

• c.

  either a or b, whichever is higher

• d.

  either a or b, as an accounting policy choice

The identifiable assets acquired and liabilities assumed in a business combination are generally measured at

• acquisition date fair values

• previous carrying amounts.

• fair value less cost to sell

• cost

Which of the following assets of an acquiree may not be included when computing for the goodwill arising from a business combination?

• capitalized kitchen utensils and equipment

• intangible assets not previously recorded

• research and development costs charged as expenses

• goodwill