Accounting for Business Combinations -Focusing on the differences between U.S. GAAP and IFRS- I. INTRODUCTION Accounting for business combinations is one of the more complicated processes in accounting. The basic idea can be quite simple. The assets and liabilities being acquired are recorded at fair value and the fair value of the consideration transferred is allocated to them, but there are many problems that can occur that make consolidating financial statements quite difficult to accomplish. In this research paper some of the simpler accounting for business combinations will be discussed. Specifically I will discuss the accounting for a 100% ownership acquisition for which the subsidiary is dissolved. The procedures that will be discussed will correspond to the accounting for these situations that must be performed on the date of acquisition. There are much more complicated instances of business combinations in which multiple problems can cause the accounting to be much more complicated, such as cases in which there is less than 100% ownership of a subsidiary or when the accounting must be performed for reporting after the year of acquisition, but these will not be discussed here. Instead this research paper will spend time detailing the acquisition method for the aforementioned situation; this paper will also contain discussion of the authoritative texts for business combinations for both United States generally accepted accounting standards (henceforth referred to as
First, let’s get a little background on accounting for business combinations. The current accounting method for business combinations was issued in 2007 with the adjustment to SFAS 141(R), “Business Combinations” under FASB ASC 805. This change was made by the Financial Accounting Standard Board (FASB) in collaboration with International Accounting Standards Board (IASB) in order to make the U.S. accounting standards align more closely with the standards of the International Financial Reporting Standards (IFRS). The business combination accounting is initiated when a company gains control of a subsidiary either by obtaining or purchasing the
A. Stock issuance costs are a part of the acquisition costs and the direct combination costs are expensed B. Direct combination costs are a part of the acquisition costs and the stock issuance costs are a reduction to additional paid-in capital C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital D. Both are treated as part of the acquisition price E. Both are treated as a reduction to additional paid-in capital 12. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in A. A worksheet B. Lisa's general journal C. Victoria's general journal D. Victoria's secret consolidation journal E. The general journals of both companies 13. At the date of an acquisition which is not a bargain purchase, the acquisition method A. Consolidates the subsidiary's assets at fair value and the liabilities at book value B. Consolidates all subsidiary assets and liabilities at book value C. Consolidates all subsidiary assets and liabilities at fair value D. Consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value E. Consolidates the subsidiary's assets at book value and the liabilities at fair
‘Cash and cash equivalents’ include certain short-term investments and, in some cases, bank overdrafts. Like IFRS, ‘cash and cash equivalents’ include certain shortterm investments, although not necessarily the same short-term investments as under IFRS. Unlike IFRS, bank overdrafts are considered a form of short-term financing, with changes therein classified as financing activities. The statement of cash flows presents cash flows during the period, classified by operating, investing and financing activities. Like IFRS, the statement of cash flows presents cash flows during the period, classified by operating, investing and financing activities. The separate components of a single transaction are classified as operating, investing or financing. Unlike IFRS, cash receipts and payments with attributes of more than one class of cash flows are classified based on the predominant source of the cash flows unless the underlying transaction is accounted for as having different components. Cash flows from operating activities may be presented using either the direct method or the indirect method. If the direct method is used, then an entity presents a reconciliation of profit or loss to net cash flows from operating activities; however, in our experience practice varies regarding the measure of profit or loss used. Like IFRS, cash flows from operating activities may be presented using either the direct method or the indirect method. Like IFRS, if
FASB Accounting Standards Codification (ASC) 805-20 (Business Combinations – Identifiable Assets and Liabilities, and Any Noncontrolling Interest) is applicable to our company’s transactions regarding the acquisition of ARU since our acquisition meets the definition of a business combination. Per ASC 805-20-05-1, it states this subtopic provides guidance on how the acquirer shall recognize and measure the identifiable assets acquired, liabilities assumed, and noncontrolling interests in the acquiree. Therefore, this subtopic is applicable to our concern on the disclosure of the extinguishment of debt in financial statements. In addition, per ASC 805-15-2 and ASC 805-15-3, the scope and scope exceptions mention the guidance in this topic applies to all entities and all transactions that meet the definition of a business combination. Per ASC 805-20-50-1, it provides guidance on how our company shall disclose the business combination that occurs during the reporting period, as follows:
Over the years, there are many controversies over equity method within IAS 28 Investments in Associates and Joint Ventures. The controversies basically lay on the vagueness of application on equity method; whether it serves as one-line consolidation (consolidation technique), measurement basis or a mixture of both. This paper divides into 3 parts. First part gives an illustration on this accounting issue in IAS 28 as well as the explanation, second part compares and contrasts the financial reports of two assigned entities and the final part discusses the qualitative characteristics of their financial reports.
Major changes have occurred for financial reporting for business combinations beginning in 2009. These changes are documented FASB ASC Topic 805, “Business Combinations” and Topic 810, “Consolidation.” These standards require the acquisition method which emphasizes acquisition-date fair values for recording all combinations.
There are several differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). The IFRS is considered more of a "principles based" accounting standard in contrast to U.S. GAAP which is considered more "rules based." By being more "principles based", IFRS, arguably, represents and captures the economics of a transaction better than U.S. GAAP. As a team me collaborated to answer the following seven questions.
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are working together to eliminate a variety of difference between the United States generally accepted accounting procedures (U.S. GAAP or GAAP) and International Financial Reporting Standards (IFRS). This convergence project grew out of an agreement reached by the two boards in 2002 (Deloitte, 2004).
The empires of both the British and the Japanese through their expansion tactics allowed them to shape certain aspects of other cultures during their growth. The British Empire, with its influence and the power to control, during its greatest time was one of the largest empires to ever cover the world. The Japanese Empire while not as powerful and vast as the British Empire was able to use the change of its government to begin its own conquests.
Differences Between GAAP and IFRS and Implications of Potential Convergence - Boundless Open Textbook. (n.d.). Retrieved February 5, 2015, from https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/introduction-to-accounting-1/conventions-and-standards-21/differences-between-gaap-and-ifrs-and-implications-of-potential-convergence-131-7049/
Present as either a single-step or multiple-step format. Expenditures are presented by function. SEC registrants should follow SEC regulations.
* To recognise separately, at the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities.
The collaborating style of conflict management would best be used during interpersonal conflict situations. For example, two employees disagreeing on the correct way to assist a customer with a challenging concern pertaining to their career. One employee may define the answer and state that ‘we’ve always done it this way;” and the other employee may point out that the guidance has changed and it is now completed a different way. This happens frequently where I work. Unfortunately, when someone leaves or retires from a job, the replacement is not usually hired until after that person is physically gone so there is no cross over or training or passed on to the new employee. Differences in opinions
The human development is a life long process that shapes and forms the manner in which a person is molded into the individual that he or she becomes during and at the end of their being. There are several stages of life where the person learns and or is instructed to become that will affect how they interact positively or negatively with the world and those people in it. This paper will focus on the stage that is described as Middle Childhood, during the age span of six to twelve years of age. This paper will also touch on aspects of the older age range considered to be Early Adolescence. During these stages of life, the person is incredibly shaped by the parent or parents’ expectations that are set on the child/children parents beliefs of
The US Generally Accepted Accounting Principles (GAAP) is a set of international accounting rules which originated from the United States. US GAAP can be defined as a set of accounting principles, standards and procedures that companies use to compile their financial statements (Elliott & Elliott, 2008). The International Financial Reporting Standards (IFRS) on the other hand are accounting rules originating from the United Kingdom. International Financial Reporting Standards (IFRS) are a set of accounting rules designed with a common global language for business affairs so that financial accounts of companies are understandable and comparable across international boundaries (Devinney, Pedersen & Tihanyi, 2010).