Valuation and Amalgamation Concepts

What are the three main methods of valuing goodwill?

• Revenue Approach

• Asset Approach Only

• Equity Approach

• Income Approach, Market Approach, Cost Approach

How is the excess of purchase price over net assets calculated in goodwill valuation?

• Excess = Fair Value of Net Assets - Purchase Price

• Excess = Purchase Price + Fair Value of Net Assets

• Excess = Purchase Price - Fair Value of Net Assets

• Excess = Purchase Price / Fair Value of Net Assets

What is the formula for calculating the value of shares using the Dividend Discount Model?

• V = D + (r - g)

• V = D / (g - r)

• V = D / (r - g)

• V = D * (r + g)

Explain the concept of the Earnings Per Share (EPS) method in share valuation.

• Earnings Per Share (EPS) is a key indicator of a company's profitability, calculated as net income divided by outstanding shares, and is used in share valuation.

• EPS measures the total revenue generated by a company.

• EPS is a method to calculate the market share of a company.

• EPS is calculated by dividing total assets by total liabilities.

What accounting treatment is required for amalgamation under Accounting Standard 14?

• The purchase method is the only acceptable method.

• Amalgamation does not require any accounting treatment.

• Only the pooling of interests method is allowed.

• Under Accounting Standard 14 requires either the pooling of interests method or the purchase method.

Define the term 'purchase method' in the context of amalgamation.

• The acquiring company records the acquired assets and liabilities at their fair market value.

• The purchase method is a legal process for merging two companies without financial considerations.

• The purchase method involves valuing the acquired company based on its historical costs.

• The purchase method is a strategy for selling assets during amalgamation.

What is the significance of the fair value of assets and liabilities in amalgamation?

• The fair value of assets and liabilities ensures accurate valuation and financial reporting in amalgamation.

• Fair value is used solely for tax purposes in amalgamation.

• Fair value only applies to liabilities, not assets.

• Fair value is irrelevant in determining asset ownership.

Describe the process of internal reconstruction in a company.

• It is the process of reorganizing a company's structure and operations to enhance efficiency and profitability.

• Internal reconstruction refers to the outsourcing of all company operations.

• It is the process of liquidating assets to pay off debts.

• Internal reconstruction involves merging with another company to expand market reach.

What are the key steps involved in the accounting treatment of internal reconstruction?

• Implementing a new marketing strategy

• Identifying the need for reconstruction, preparing a reconstruction scheme, reassessing asset values, canceling or reducing share capital, issuing new shares, adjusting financial statements, and communicating changes to stakeholders.

• Conducting a market analysis

• Filing for bankruptcy

How is goodwill impairment testing conducted?

• By comparing the fair value of a reporting unit to its carrying amount, and recognizing an impairment loss if the fair value is lower.

• Goodwill impairment testing requires a physical inspection of assets.

• Goodwill impairment testing is conducted annually without regard to fair value changes.

• Goodwill impairment testing is based solely on historical costs.