Exam 25: Business Combinations

Under AASB 3/IFRS 3 Business Combinations, a gain on bargain purchase arises when the acquirer's interest in the fair value of the acquiree's identifiable assets and liabilities is:

Watson Limited acquires the net assets of Lake Limited for a cash consideration of $160 000. One half is to be paid on acquisition date and the other half is payable in one year's time. The appropriate discount rate is 8% p.a. The present value of the cash outflow in one year's time is:

An acquirer accounting for a business combination must consider: I. Recognition of the liabilities assumed. II. Measurement of the liabilities assumed. III. Recognition of the identifiable assets acquired. IV. Measurement of the identifiable assets acquired.