SPECIAL TOPICS IN BUSINESS COMBINATION AND CONSOLIDATION

Flashcards covering key vocabulary and definitions from lecture notes on business combinations and consolidation, including IFRS for SMEs, business combinations, reverse acquisitions, and the use of the going concern basis.

Small and Medium-Sized Entities (SMEs)

• Entities that do not have public accountability and

• publish general-purpose financial statements for external users.

External Users

Owners not involved in managing the business, existing and potential creditors, and credit rating agencies.

General-Purpose Financial Statements

Present fair financial position, operating results, and cash flows for external capital providers and others.

entity has Public Accountability if:

• Its debt or equity instruments are traded in a public market,

• it holds assets fiducially for a broad group of outsiders as one of its primary businesses.

Control

The power to govern an entity's financial and operating policies to obtain benefits.

Procedures for Consolidation

Eliminate intracompany transactions and balances, observe uniform reporting date and accounting policies, non-controlling interest is presented as part of the equity

Business combinations

The acquisition (purchase) method shall be used.

Cost of the business combination

The fair value of assets given, liabilities incurred or assumed, and equity instruments issued, plus costs directly attributable to the combination.

Identifiable assets acquired and liabilities assumed

Measured at their fair values

Goodwill

The excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities, and contingent liabilities

Reverse acquisition

The entity that issues shares (the legal parent) is identified as the acquiree, and the entity whose equity interests are acquired (the legal subsidiary) must be the acquirer.

Use of Going Concern Basis by an Absorbed Entity in a Merger Transaction

All absorbed entities in a merger transaction can prepare their financial statements using the going-concern basis.

Liquidation

An entity converts its assets to cash or other assets and settles its obligations with creditors in anticipation of the entity ceasing all activities.