IFRS Business Combinations - Comprehensive Notes

Eureka Toy Co. (Eureka) is a public company that is purchasing the net assets of another toy company, Toy Corp. Which of the following best describes how Eureka will record this transaction?

All identifiable assets and liabilities of Toy are recorded by Eureka at their FV's

Which of the following best describes when an investor (a parent) controls an investee (a subsidiary)?

When the investor holds more than 50% of the voting shares of the investee

Which of the following is the date of acquisition in a business combination?

The date that the parent obtains control of the subsidiary

Which of the following is considered a business when determining whether a business combination has occurred?

An integrated set of activities and assets that are managed to provide a return

Which of the following best describes how acquisition-related costs impact the purchase price of a subsidiary?

Acquisition-related costs do not form part of the purchase price of a subsidiary

On May 13, Year 1, Certainly Inc. purchased 100% of the net assets of Maybe Co. for $340,000. At the time of purchase, Maybe had R/E of $135,000 and common shares of $10,000. Maybe also had the following assets and liabilities:

	BV	FV
Investments (at cost)	$15,000	$8,000
Building	210,000	300,000
Land	85,000	150,000
Mortgages payable	(165,000)	(165,000)

Which of the following debit or credit forms part of the journal entry that Certainly will make to record its purchase of Maybe’s assets and liabilities? Assume Certainly reports using IFRS and ignore income tax implications.

Goodwill is calculated as the purchase price less the FV of the assets purchased, plus the FV of the liabilities purchased:

Purchase price	$340,000
Investments (at cost)	(8,000)
Building	(300,000)
Land	(150,000)
Mortgages payable	165,000
Goodwill	$47,000