Focus on: Consolidated Statements—Module 18
BUSINESS COMBINATIONS/ACQUISITIONS
Consolidation is required whenever the acquirer has control over another entity.
- Acquirer is the entity that obtains control of one or more businesses in the business combination
- Ownership of majority of voting stock generally indicates control
- Consolidation is required even if control situation is temporary
- Consolidation is not appropriate when a majority shareholder doesn’t have effective control:
- Company is in bankruptcy or reorganization
- Foreign exchange controls limit power to keep control of subsidiary assets
- All consolidations are accounted for as acquisitions
- The acquirer shall recognize goodwill, the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and any residual goodwill
- Recognize separately
- Acquisition-related costs
- Assets acquired and liabilities assumed arising from contractual contingencies
- Bargain purchase (fair value of assets acquired > amount paid) recognized as gain
- Fair values of research and development assets
- Changes in the value of acquirer deferred tax benefits
Accounting for an Acquisition
Combination—Records Combined
Assets (at fair market values) | xxx |
Separately identifiable assets | xxx |
Goodwill (plug) | xxx |
Liabilities (at fair market values) |
xxx |
Stockholders’ equity (two steps)* |
xxx |
OR |
|
Cash (amount paid) |
xxx |
* Credit common stock for par value of shares issued and credit additional paid-in ...
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