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10 Questions

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Accounting for Business Combinations

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Questions and Answers

What is the key feature that distinguishes a business according to the application guidance in paragraph B7 of AASB 3/IFRS 3?

Integrating acquired processes

Acquiring assets

Being capable of providing a return (correct)

Producing outputs

In the context of a business combination, when does control exist?

When there are fixed returns from using those assets

When the acquirer integrates acquired processes

When the acquiree retains control of the assets acquired

When the entity has the power to direct future benefits of the assets acquired (correct)

According to AASB 3/IFRS 3, does an entity need to produce outputs to be classified as a business?

Yes, always

No, only needs to acquire assets (correct)

Depends on the size of the entity

Yes, unless it acquires processes

What constitutes a business in the context of AASB 3/IFRS 3 when an acquirer integrates the acquired business into its own inputs and processes?

Cost savings generated from integration Signup and view all the answers

If an entity is still in the development stage and not producing outputs, can it be classified as a business?

Yes, as long as it is capable of providing a return Signup and view all the answers

What is required for an entity to be classified as a business according to AASB 3/IFRS 3?

Having the capability to provide a return Signup and view all the answers

When does control exist in a business combination as per the provided text?

When the acquirer can direct future benefits and get varying returns Signup and view all the answers

In the context of AASB 3/IFRS 3, what makes an entity capable of being classified as a business?

Having the potential to provide a return Signup and view all the answers

What is the main factor that determines if an investment constitutes a business or not?

The nature of the economic transaction Signup and view all the answers

What allows an entity still in development to be classified as a business?

Potential cost savings Signup and view all the answers