Business Combinations

As the responsibilities of the global harmonization of accounting standards IFRS and GAAP transfer to IASB, FASB’s influence is waning. Advantages of the convergence include high quality financial reporting, which lowers cost of capital for investors and the cost of borrowing for companies. However, there are disadvantages to be noted, such as the costs of introducing IFRS to current and potential accountants and the risk of reducing the uniformity of financial reports due to the lax rulings of IFRS, which promotes earnings management amongst companies. Although arguments regarding the convergence remain prevalent, the completion of IFRS and GAAP is inevitable. Come year 2015, accountants, investors, and companies alike will discover whether or not the pros outweighed the cons; or vice versa.

Under FASB ASC 805-10-25-23, acquisition related costs in business combinations are reported as an expense at the time of their occurrence by the acquiring company. This was a change from the previous way of capitalizing acquisition related costs for all business combinations and was established for all business combinations complete on or after January 1, 2009. This was a needed change in accounting because the acquisition costs do not represent a future value, are not a part of the value of the business being purchased, and would be expensed if the decision was made not to acquire the company being evaluated.

* In some business combinations, the acquirer has cumulative losses that caused the acquirer to conclude that a valuation allowance was required on its deferred tax assets (including net operating losses) immediately prior to the acquisition, and the deferred tax liabilities assumed in the business combination are available to offset the reversal of the acquirer’s pre-existing deferred tax assets.

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:

This issue started to arise when IASB was developing IFRS 11 Joint Arrangements. The IASB have decided to remove the option to apply proportionate consolidation to jointly controlled entities that existed under IAS 31 Interests in Joint Ventures and this has widened the scope of equity method under IFRS (European Financial Reporting Advisory Group, 2014). Since then the IASB has been doing research project on equity method of accounting and considering various requests for guidance through narrow-scope amendments to IAS 28. Hence, Exposure Drafts has been published. They have addressed the diversity in practice. However, these proposed amendments are lacked of a clear conceptual basis and they were inconsistent with each other. They found out that components of consolidation techniques and measurement basis exist in IAS 28 and there is no

The assets and liabilities being obtained were recorded by the buyer at fair value as of the date of acquisition

Since 2002, Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (IASB) have been working toward “convergence” of US General Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). They have made significant progress in efforts to converge critical accounting standards such as those dealing with revenue recognition, financial instruments and leases. Once these projects are complete, the "era" of convergence will be at an end. Nevertheless, the benefits for investors of eventually getting to consistently applied, high-quality, globally accepted accounting

China have set up large Hypermarkets where most of their physical presence Is obtained, and are currently opening a few express stores and online sites.

The most effective way to eliminate the two operating segments from the newly acquired company is to aggregate them with our existing operating segments. There are specific prerequisites for aggregation, as specified in FASB ASC 280-10-50-11. Segments may be aggregated if they have similar economic characteristics and if they are similar in all of the following areas:

A joint convergence committee created the members of (FASB) and (IASB). (IASB) is recognized as an independent accounting standard-setting body that is similar to (FASB) that joins (GAAP), and is governed by the (IFRS) foundation. Due to this convergence, (AICPA) believes U.S. adoption of a single set of high-quality, globally accepted accounting standards will benefit U.S. financial markets and public companies by enabling preparation of transparent and comparable financial reports throughout the world, (American Institute of CPAs, 2016). Secondly, (AICPA) is dedicated to supplying the whole accounting profession with information, tools and IFRS.com for instance to assimilate as well as implement a new set of standards. As the (AICPA) supports continual convergence of reliable accounting standards between (IFRS) and (GAAP) the mission of completion between (IASB) and (FASB) is prolonged. (AICPA) will always support funding mechanisms of the body-making

A congruent between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) is that both specification tend to use a statement of cash flows, income statement and a balance sheet (Nadel, 2010). When confronting cash equivalents and cash, both approaches are essentially similar in characteristic. Furthermore, the leading reciprocal is that both IFRS and GAAP assist in producing financial statements on an accrued basis; generally meaning that revenue is often recognized once it is realized (Nadel, 2010). In the course of time this will assist in a complete merger of both accounting principles in the near future; eventually a merger will assist with the differences associated with both IFRS and GAAP allowing for certain principles to be removed or restructured.

All of these identifiable intangible assets meet the contractual-legal criterion for the recognition of intangible assets as required by ASC…..(FIND STD FOR INTANGIBLE ASSET CRITERION). Tom’s Tractor also acquired Tractor Heaven. Among the assets acquired from Tractor Heaven are a customer list, and a non-contractual relationship with Bonanza Farming. One-half of the customer list has confidentiality agreements attached to them and therefore do not meet the separability or contractual-legal criterion for the recognition of intangible assets. Therefore, the one-half of the customer list that does not contain confidentiality agreements does meet the separability criterion for intangibles and is an identifiable intangible asset that is listed separately from goodwill. The customer relationship with Bonanza Farming is contingent on the details of the relationship as more information is needed to make a judgment. The net result of Tom’s acquisitions is less externally purchased goodwill on the balance sheet and more intangible assets separately listed. Furthermore, this gives investors more information concerning the reasons for acquiring these two companies (i.e. it will be more obvious to users that the business purpose for purchasing Tractor Heaven and RLS is due to their customer relations needed for Tom’s Tractor to gain market share, increase customer awareness, etc.)

Wanting to control the market as a whole, rising businesses wanted to create corporate monopolies, consolidate the stocks in a large company, have complete domination over their workers, and be able to obliterate all competition. However, many anti-trust supporters tried to use government policies in order to stop these new business practices.

In 2008, the Securities and Exchange Commission (SEC) issued a road map for the United States (US) to implement International Financial Reporting Standards (IFRS) that would eventually lead to the dissolution of US Generally Accepted Accounting Principles (US GAAP) (Cox 2008). US GAAP is rules based system of accounting that contains over 25,000 detailed pages of guidance, whereas IFRS is a principles based system of accounting that contains 2,500 pages of guidance. IFRS allows accountants to exercise professional judgment when making many decisions. This paper will compare and contrast US GAAP with IFRS on Intermediate Accounting Topics.

Coca Cola is a soft fizzy drink sold in every store throughout the world. It is produced by The Coca Cola Company of Atlanta in Georgia, and is often called as Coke.