Wiley CPAexcel Exam Review 2014 Study Guide, Financial Accounting and Reporting

Module 18: Business Combinations and Consolidations

Overview

This module covers business combinations and consolidations. To qualify for treatment as a business combination, the entity must meet the definition of a business. If an entity is not considered a business, the transaction is accounted for as an asset acquisition and goodwill is not recognized.

Acquisition accounting is the method to account for a business combination and it consists of four steps: (1) identifying the acquirer; (2) determining the acquisition date; (3) recognizing and measuring assets acquired, liabilities assumed, and noncontrolling interest in the acquirer; and (4) recognizing goodwill. Each of these steps is discussed in detail. Numerous examples relating to variations in acquisition accounting are presented along with the calculation of goodwill and intercompany eliminating entries.

This module also discusses required disclosures, combined financial statements, and push-down accounting. Push-down accounting is required by the SEC. It requires the subsidiary to revalue its assets and liabilities to fair value.

A. Scope—Acquisition Method

B. The Acquisition Method for Business Combinations

C. Consolidated Financial Statements

D. Pelican Corp. and Swan Corp.—Acquisition of Swan, 100% Acquisition

E. Pelican Corp. and Swan Corp.—Date of Combination Consolidated Balance Sheet—Acquisition Method (100% Acquisition)

F. Consolidated Financial Statement Subsequent to Acquisition

G. Intercompany Transactions ...