1 – BUSINESS COMBINATIONS

1 – ANSWER:
BUSINESS COMBINATION IS A TRANSACTION
OR EVENT IN WHICH AN ACQUIRER OBTAINS
CONTROL OF ONE OR MORE BUSINESSES (THE
ACQUIREE).
2 – THREE ELEMENTS USED TO IDENTIFY A
BUSINESS
 2 – ANSWER:
INPUTS, PROCESSES, OUTPUTS
3 – GOODWILL
 3 – ANSWER:
THE EXCESS OF THE "PURCHASE
CONSIDERATION" (THE MONEY PAID TO
PURCHASE THE ASSET OR BUSINESS) OVER
THE TOTAL VALUE OF THE ASSETS AND
LIABILITIES.
4 – ACCOUNTING TREATMENT FOR EXCESS OF
PURCHASE CONSIDERATION OVER TOTAL
VALUE OF SET OF ASSETS AND LIABILITIES
ACQUIRED WHEN THE SET IS NOT
CONSIDERED A BUSINESS
 4 – ANSWER:
ACCOUNTED FOR AS ASSET ACQUISITION THE
EXCESS BEING ALLOCATED AS COST OF ASSETS
ON THE BASIS OF FAIR VALUE
5 – TWO WAYS OF ACQUIRING CONTROL OF
ANOTHER COMPANY
 5 – ANSWER:
ACQUIRING THE ASSETS OF THE TARGET
COMPANY (ALSO ASSUMING LIABILITIES IF
ANY); ACQUIRING A CONTROLLING INTEREST
(> 50%) IN THE TARGET COMPANY’S VOTING
COMMON STOCK.
6 – TWO KINDS OF BUSINESS COMBINATIONS
UNDER THE LAW
 6 – ANSWER:
STATUTORY CONSOLIDATION, STATUTORY
MERGER
7 – TWO PARTIES UNDER STOCK ACQUISITION
 7 – ANSWER:
PARENT (ACQUIRER), SUBSIDIARY (ACQUIREE)
 8 – TWO METHODS OF BUSINESS
COMBINATIONS BEFORE IFRS 3 & METHOD TO
BE USED AS MANDATED BY IFRS 3
 8 – ANSWER:
1) PURCHASE METHOD (FV), POOLING OF
INTEREST METHOD (BV)
2) ACQUISITION METHOD (SAME AS
PURCHASE METHOD)
9 – FOUR STEPS IN THE APPLICATION OF THE
ACQUISITION METHOD
 9 – ANSWER:
1) IDENTIFY THE ACQUIRER;
2) DETERMINE THE ACQUISITION DATE;
3) DETERMINE THE CONSIDERATION GIVEN BY THE
ACQUIRER;
4) RECOGNIZE EASURE IDENTIFIABLE ASSETS
ACQUIRED, THE LIABILITIES ASSUMED AND ANY
NON-CONTROLLING INTEREST IN THE ACQUIREE;
5) RECOGNIZE ANY RESULTING GOODWILL OR GAIN
FROM BARGAIN PURCHASE
10 – CONTINGENT CONSIDERATION
 10 – ANSWER:
CONTINGENT CONSIDERATION IS AN
OBLIGATION OF THE ACQUIRING ENTITY TO
TRANSFER ADDITIONAL ASSETS OR EQUITY
INTERESTS TO THE FORMER OWNERS OF AN
ACQUIREE UPON THE FULFILMENT OF
CERTAIN CONDITIONS LIKE MEETING A
SPECIFIED LEVEL OF EARNINGS.
11 – TWO KINDS OF COSTS INCURRED DURING
ACQUISITION
 11 – ANSWER:
ACQUISITION-RELATED COSTS (OUTRIGHT
EXPENSE/RETAINED EARNINGS), STOCK
ISSUANCE COSTS (APIC/SHARE PREMIUM)
12 – RECOGNIZE ANY RESULTING GOODWILL
OR GAIN FROM BARGAIN PURCHASE
 12 – ANSWER:
PRICE > FV ASSIGNED TO NET ASSETS – “NEW”
GOODWILL (IDENTIFIABLE ASSETS SHOULD
NEVER INCLUDE GOODWILL THAT MAY EXIST
ON THE ACQUIREE’S BOOKS)
PRICE < FV ASSIGNED TO NET ASSETS – GAIN
ON BARGAIN PURCHASE
13 – FOUR POINTS THAT SUMMARIZE THE
ACCOUNTING PROCEDURES IN RECORDING
ACQUISITIONS
 13 – ANSWER:
• ALL ACQUIREE ACCOUNTS IDENTIFIED ARE
MEASURED AT FAIR VALUE;
• IF TOTAL CONSIDERATION GIVE EXCEEDS FV OF
NET IDENTIFIABLE ASSETS ACQUIRED, EXCESS
PRICE IS RECORDED AS GOODWILL. OTHERWISE,
GAIN ON ACQUISITION (BARGAIN PURCHASE);
• ALL ACQUISITION-RELATED COSTS ARE
EXPENSED EXCEPT FOR COSTS TO ISSUE EQUITY
SECURITIES (REDUCTION TO APIC)
14 – MEASUREMENT PERIOD
 14 – ANSWER:
ONE YEAR PERIOD ALLOWED FOR ACQUIRING
COMPANY TO ESTABLISH VALUES OF
ACCOUNTS RECOGNIZED REGARDING
ACQUISITION
15 – TWO SETS OF JOURNAL ENTRIES FOR
CONTINGENT CONSIDERATION
 15 – ANSWER:
1) PAYABLE IN CASH OR OTHER ASSETS OTHER THSN ISSUING
ADDITIONAL SHARES OF STOCK:
• ACQUISITION DATE (CR. CONTINGENT CONSIDERATION
PAYABLE)
• CHANGE IN ESTIMATE DURING MEASUREMENT PERIOD (DR.
GOODWILL, CR. CCP)
• CHANGE IN ESTIMATE BEYOND MEASUREMENT PERIOD (DR.
LOSS ON CCP, CR. CCP)
2) PAYABLE BY ISSUANCE OF ADDITIONAL SHARES OF STOCK
• DATE OF ACQUISITION (NO ENTRY FOR CCP)
• DATE OF ISSUANCE WHEN CONDITION IS MET (DR. APIC, CR.
COMMON STOCK)
16 –
1 – ANSWER: