Business Combination

1719 Words Mar 7th, 2014 7 Pages
Assignment 1: Business Combinations
Cindy Yoon
Professor Robert Neely
ACC 401 – Advanced Accounting
October 24, 2013

Abstract
In this paper, I will provide an explanation for the business combination method I selected in expanding the corporation by acquiring another firm, the reason for selecting that business combination method, and how the purchase will grow the business. I will also analyze the accounting requirements for the business combination method I selected and how I determined goodwill was impaired and the financial impact of such impaired goodwill.

The business combination method I selected is the acquisition method. Business combinations have implemented the newly created accounting treatment called the
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A requirement of this method is that the acquirer must be identified in every business consolidation clearly. Below are several key components changes in the acquisition method: Measurement of the subsidiary’s net identifiable assets is based on the fair value of the subsidiary as a whole, rather than based on the cost of purchase at the acquisition date. The acquisition date is the closing date that the purchaser obtains control of the acquired business. For example, the parent will still have full control of the entire subsidiary even if they purchased less than 100% of the net identifiable assets. The parent incorporates the full fair value of the subsidiary in the consolidated financial statements and then allocates to the non-controlling interest. The key difference between the purchase method and the acquisition method is that in the acquisition method, all of the Fair Market Value increment and all of the goodwill is recognized, including the portion attributable to the non-controlling interest. The reason behind this idea is that a business in control of another entity should be able to fully control