Exam 3: Business Combinations

According to the Conceptual Framework, recognition of an asset occurs if it is probable that future economic benefits will flow to the entity and:

Acquisition-related costs associated with a business combination, such as professional fees paid to accountants, legal advisers and other consultants, are considered part of the cost of acquisition.

When the acquirer buys only shares in the acquiree, there are no entries in the records of the acquiree.

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date is defined in AASB 3/IFRS 3 Business Combinations as the:

Ying Limited acquires the net assets of Yang Limited for a cash consideration of $50 000. One half is to be paid on acquisition date and one half is payable in one year's time. The appropriate discount rate is 5% p.a. The present value of the cash outflow in one year's time is:

Property, plant and equipment and investments are both examples of monetary assets.

For a group of assets to constitute a business, they must be capable of providing a return.

The two types of contingent liabilities are:

The date on which the acquirer obtains control of the acquiree is referred to as the:

The acquirer in a business combination is the party that loses control of a business.

In a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss or other comprehensive income.

When an acquiree liquidates, the accounts of the acquiree are transferred to which two accounts?

Bellvista Limited acquired the net assets and contingent liabilities of Aroona Limited for a purchase consideration of $600 000. Aroona Limited's net assets and contingent liabilities at fair value were: total assets $840 000; total liabilities $300 000; and contingent liabilities $100 000. The amount of goodwill to be recognised by Bellvista Limited when recording the business combination is:

Which of the following is an example of asset recognised by the acquirer as part of a business combination but that is not recognised by the acquiree?

Fair value is determined in the first instance by reference to observable prices in an active market for identical assets or liabilities.

At the date of acquisition, goodwill is measured as the excess of the consideration transferred over the net fair value of the identifiable assets acquired and liabilities assumed.

The acquisition date is the date on which the contract between the acquirer and acquiree is signed.

In a business combination, the acquiree is the business that:

In respect to a business combination, a gain on bargain purchase arises where the acquirer's interest in the net fair value of the identifiable assets and liabilities acquired is greater than the consideration transferred by the acquirer to the acquiree.

Appendix B of AASB 3/IFRS 3 Business Combinations requires disclosure of which of the following? I. Details of contingent consideration. II) The date of exchange. III) Carrying amounts of assets and liabilities in business combinations where shares are acquired. IV) A qualitative description of the factors that make up goodwill.