Business Combination And Its Effect On Business

The advantages of asset purchase for the management team are that they retain ownership of the shares of stock of the business because only assets and liabilities, which are specifically identified in the purchase agreement, are transferred to the buyer. They can still control the operation and employees assignment. However, the transactions of Asset purchase are generally more complicated because ownership of the assets and liabilities and any related contracts must actually

The information in this report regarding the accounting standards for private companies is as stated in the proposal stage. The three options discussed are options being considered and the Accounting Standards Board (AcSB) has issued an

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

Which of the following should be included in the acquisition cost of a piece of

Paragraph 805-10-50-1 identifies one of the objectives of disclosures about a business combination. To meet that objective, the acquirer shall disclose all of the following information for each business combination that occurs during the reporting period:

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.

ASC 820 requires that the measurement of fair value of assets acquired and liabilities assumed should be based on the

Cisco allocates the fair value of the purchase consideration of its acquisitions to the tangible assets, liabilities, and intangible assets acquired. The excess fair value of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

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.

The field of accounting is constantly evolving. This is true not only for the theory of accounting itself but also the entities that govern its theory and practice. Presently, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are faced with some of the biggest challenges to date. To understand the significance of these two boards, it is necessary to understand their histories, relations between the boards, and the standards that they set. Also how the knowledge of these boards and the field they lead, gained through the masters of science in accountancy

Shown above is an actual extract of notes to financial statement in relation to AASB15, Greencross Limited has given a brief summary of the content and interpretation of the AASB 15 in its disclosure. However, it is important to note that the application date as per the standard is erroneously stated. It has indicated that it is effective for annual reporting periods beginning on or after 1 January 2017 instead of 1 January 2018. Given this scenario, it is highly recommended that the entity should be more updated, clear, and accurate on disclosing the prescribed effective date as per the standard which the year should be 2018 and not 2017.

AASB 3 Business combinations para.14 requires that the acquisition method be used to account for business combinations. This method requires the identification of the acquirer. For example, para.17 states that “an acquirer shall be identified for all business combinations”.

Main focus of IASB for introducing new standard for business combinations was that financial statements of companies became more realistic and to represent real economic position and value of a company. Therefore restriction to acquisition method as the only option for business combination is the advantage of new standard since using this method, companies do not have a choice whether to recognize goodwill arising from business combinations. Amortization was changed with impairment because amortization of goodwill can lead to arbitrary accounting according to IASB (Shinhan Financial Group n.d., p. 4). Problem arising is that impairment test and determination of recoverable amount require an active market with homogenies assets and available prices which is hard to determine as far as intangibles are concerned. Consequently, this leads to more subjective decisions regarding measurement and leaves a lot of space for management impact on goodwill. Therefore aim of IASB for transparency and full fair value model is not realized.

Dissolution of all but one of the separate legal entities is not necessary in order to have a business combination. A business combination is created when a number of separate organizations are tied together through common control, or an acquirer obtains control over one or more businesses.

According to this concept the asset is recorded in the books of accounts at the price paid for it and not at its market value. For example: if a business entity purchases a building valued at $15 million from a friend for $12 million, this asset would be recorded at $12 million and not at $ 15 million, because for the business entity the cost was $12 million and not $15 million.