Corporate Accounting

2. How and when is goodwill measured? (2 Marks)

After initial recognition, the acquirer shall measure goodwill acquired in a business combination at cost less any accumulated impairment losses.

3. How are directly attributable acquisition related costs accounted for? Why?

They are treated as expenses by the acquirer hence they are DR as cash is CR when the expense is paid off.

5. List two indicators which can assist in assessing which entity is the acquirer in a business combination. (2 Marks)

*entity that obtains control of the other business

* entity that acquires net assets of the other business

* Acquires more than 50% of that entity's voting rights.

* power to appoint or remove the majority of members of board of directors.

6. Define control. (1 Mark)

* Control is the power to govern the financial and operating policies of a business so as to obtain benefits from its activities.

9. Why is the concept of control essential to accounting for business combinations? (1 Mark)

To identify the acquirer in the business combination.

11. What steps should an accountant take immediately after calculating that a gain on bargain purchase has arisen from a business combination transaction? (2 Marks)

Must reassess whether it has correctly:

a) Identified all the assets acquired and liabilities assumed;

b) Measured at fair value all the assets acquired and liabilities assumed;

c) Measured the consideration transferred.

12. What is the key difference between identifiable assets and goodwill? (1 Mark)

Goodwill is not individually identifiable and only recognized if arisen from business combination

14. What is a gain on bargain purchase and how is it accounted for? (1 Mark)

Gain on bargain purchase is the net fair value of the acquiree's identifiable assets and liabilities less Consideration transferred. It is credited as a gain in the journal entries. (revenue account)

16. In accounting for a business combination...