Consolidation of Financial Information

First, let’s get a little background on accounting for business combinations. The current accounting method for business combinations was issued in 2007 with the adjustment to SFAS 141(R), “Business Combinations” under FASB ASC 805. This change was made by the Financial Accounting Standard Board (FASB) in collaboration with International Accounting Standards Board (IASB) in order to make the U.S. accounting standards align more closely with the standards of the International Financial Reporting Standards (IFRS). The business combination accounting is initiated when a company gains control of a subsidiary either by obtaining or purchasing the

Paragraph 805-10-50-1 identifies one of the objectives of disclosures about a business combination. To meet that objective, the acquirer shall disclose all of the following information for each business combination that occurs during the reporting period:

dealt at arm’s length, and the selling price of $1,250,000 is the fair market value of the shares at the

• Transaction structures—the takeover could involve a cash offer, a share offer, an asset swap or a combination of these methods. Need to consider legal, taxation and accounting issues.

A. Stock issuance costs are a part of the acquisition costs and the direct combination costs are expensed B. Direct combination costs are a part of the acquisition costs and the stock issuance costs are a reduction to additional paid-in capital C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital D. Both are treated as part of the acquisition price E. Both are treated as a reduction to additional paid-in capital 12. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in A. A worksheet B. Lisa's general journal C. Victoria's general journal D. Victoria's secret consolidation journal E. The general journals of both companies 13. At the date of an acquisition which is not a bargain purchase, the acquisition method A. Consolidates the subsidiary's assets at fair value and the liabilities at book value B. Consolidates all subsidiary assets and liabilities at book value C. Consolidates all subsidiary assets and liabilities at fair value D. Consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value E. Consolidates the subsidiary's assets at book value and the liabilities at fair

Assets are to be recorded and valued based of the type of asset there are.

Cisco allocates the fair value of the purchase consideration of its acquisitions to the tangible assets, liabilities, and intangible assets acquired. The excess fair value of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value.

A merger is a partial or total combination of two separate business firms and forming of a new one. There are predominantly two kinds of mergers: partial and complete. Partial merger usually involves the combination of joint ventures and inter-corporate stock purchases. Complete mergers are results in blending of identities and the creation of a single succeeding firm. (Hicks, 2012, p 491). Mergers in the healthcare sector, particularly horizontal hospital mergers wherein two or more hospitals merge into a single corporation, are increasing both in frequency and importance. (Gaughan, 2002). This paper is an attempt to study the impact of the merger of two competing healthcare organization and will also attempt to propose appropriate

Question 1 Several factors have been proposed as providing a rationale for mergers. Among the more prominent ones are (1) tax considerations, (2) diversification, (3)

The fair value of an asset is defined as ‘the price that would be received to sell an asset paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Kieso, Weygandt, & Warfield, 2012). It is a market based measure (Averkamp, 2014). Over the past few years, Generally Accepted Accounting Principles has called for the use of fair value measurement in a company’s financial statements. This is what is referred to as the fair value principle (Kieso, Weygandt, & Warfield, 2012). The fair value of an asset or liability is based on an estimate of what the asset should be worth at the time of sale. This gives rise to some conflict among accounting professionals. It is believed that fair value may not be as accurate

extracted from the combination of the two businesses. For example, such a consolidation would allow

AASB 3 Business combinations para.14 requires that the acquisition method be used to account for business combinations. This method requires the identification of the acquirer. For example, para.17 states that “an acquirer shall be identified for all business combinations”.

The business combination method I selected is the acquisition method. Business combinations have implemented the newly created accounting treatment called the

According to this concept the asset is recorded in the books of accounts at the price paid for it and not at its market value. For example: if a business entity purchases a building valued at $15 million from a friend for $12 million, this asset would be recorded at $12 million and not at $ 15 million, because for the business entity the cost was $12 million and not $15 million.