BUSINESS COMBI

With respect to the allocation of the cost of a business acquisition, PFRS 3 requires

Cost to be allocated based on fair values.

Pilipinas Co. acquired all of the assets and liabilities of Saba Co. for cash in a legal merger. Which one of the following would not be recognized by Pilipinas on its books in recording the business combination?

Investment in Saba Co.

An intangible asset with an indefinite life is accounted for as follows:

No amortization but annual impairment test.

IFRS 3 requires all identifiable intangible assets of the acquired business to be recorded at their fair values. Many intangible assets that may have been subsumed within goodwill must be now separately valued and identified. Under IFRS 3, when would an intangible asset be "identifiable"?

When it meets the definition of an asset in the Framework document only.

An entire acquired entity is sold. The goodwill remaining from the acquisition should be

Included in the carrying amount of the net assets sold

At the acquisition date, which of the following is NOT required to be recognized by the acquirer?

Retained earnings of the acquiree.

In accounting for business combination, which of the following intangibles should not be recognized as an asset apart from goodwill?

Employee quality

Which of the following statements is NOT in accordance with IFRS 3, Business Combination?

The acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition-date agreed values.

As defined in IFRS 3, Business Combination, goodwill is

Future economic benefits arising from assets that are not capable of being separately recognized or individually identified

Company P acquired, the assets (net of liabilities) of Company S in exchange for cash. The acquisition price exceeds the fair value of the net assets acquired. How should Company P determine the amounts to be reported for the plant and equipment, and for long-term debt of the acquired Company S?"

1. Plant and Equipment 2. Long-term Debt

Fair value; Fair value

What is meant by "full goodwill" method?

The recognition of the goodwill, which relates to the non-controlling interest and the controlling interest.

Which of the following statements is NOT a key feature of the acquisition method?

Cost of the business combination is measured at the fair value of the net assets received from the aquiree.

In a business combination, Dire Co. purchased Wall Co. at a cost that resulted in recognition of goodwill having an expected 10-year benefit period. However, Dire plans to make additional expenditures to maintain goodwill for a total of 40 years. What costs should be capitalized and over how many years should they be amortized?

Acquisition costs only; 2. 0 years

How is goodwill measured under IFRS 3, Business Combination?

Choice of partial or full goodwill on individual transaction basis.

Should the following costs be included in the consideration transferred in *0/1 a business combination, according to IFRS 3, Business Combination? 1- Cost of maintaining an acquisitions department. 2- Fees paid to accountants to effect the combination.

Cost 1 - No; Cost 2 - No

Which of the following statements is true regarding a statutory merger?

The acquired company dissolve as a separate corporation and becomes a division of the acquiring company.

A business combination is accounted for as a purchase. Which of the following expenses related to the business combination should be included, in total, in the determination of net income of the combined corporation for the period in which the expenses are incurred?

1. fees of finders wnd consultants

2. Registration fees for equity securities issued

1. Yes; 2. No

A business combination may be legally structured as a merger, a consolidation, an investment in stock, or a direct acquisition of assets. Which of the following describes a business combination that is legally structured as a merger?

The surviving company is one of the two combining companies.

In relation to goodwill arising from a business combination, which one of *1/1 the tollowing statements is in accordance with FRS 3, Business Combination?

Goodwill should be measured at cost less accumulated impairment losses.

Which of the following statements is true regarding the acquisition method for a business combination?

Net assets of the acquired company are reported at their fair values.

In a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination: Under IFRS 3, Business Combination, the acquirer should

Reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or loss.

If the impairment of the value of goodwill is seen to have reversed, then the company may

Not reverse the impairment charge.

A horizontal merger is a merger between

Two or more firms in the same market.