30 Questions
What is the term used to describe a constituent company other than the combinor in a business combination?
Combinee
What type of business combination involves enterprises in the same industry?
Horizontal Combination
What is the term used to describe the accounting entity that results from a business combination?
Combined Enterprise
What type of business combination involves an enterprise and its customers or suppliers?
Vertical Combination
What is the term used to describe a company entering into a combination whose owners as a group end up with control of the ownership interests in the combined enterprise?
Combinor
What type of vertical combination involves a company acquiring one of its suppliers?
Backward Vertical Combination
What is the primary condition for a transaction to be considered a business combination?
The assets acquired and liabilities assumed constitute a business.
What is the key characteristic of a business, as defined in IFRS 3?
It is capable of being conducted and managed for the purpose of providing a return.
What is the accounting treatment for a transaction where the assets acquired are not a business?
It is accounted for as an asset acquisition.
What is outside the scope of IFRS 3?
Business combinations involving entities under common control.
What are the three components of a business, as defined in IFRS 3?
Input, process, and output.
What is the purpose of a business, as defined in IFRS 3?
To provide a return in the form of dividends or other economic benefits.
What is the date on which the acquirer obtains control of the acquiree, generally?
The date on which the acquirer legally transfers the consideration
What is the acquisition date in Example 1?
1 April 20X1
When can Entity A remove any of Entity B's directors in Example 1?
31 January 20X1
What is the condition for SME A to be entitled to all profits from SME B in Example 2?
Successful completion of due diligence
On what date is the consideration and shares transferred in Example 2?
2 February 20X1
What determines the amount offered by SME A to acquire 100% of SME B's voting shares?
SME B's net assets at the date of the offer
Which of the following is a key factor in identifying the acquirer in a business combination?
The entity with the largest share of voting rights
In a situation where a company acquires a large minority interest (under 50%) in another company, which of the following is likely true?
The company acquiring the large minority interest is likely the acquirer
What is a key indicator of the acquirer in a business combination, according to IFRS 3?
The entity that issues equity interests
In a roll-up or put-together transaction, how is the acquirer identified?
By applying the guidance described above
What is a characteristic of the acquirer in a business combination?
Pays a premium over the pre-combination market value of the shares acquired
In identifying the acquirer in a business combination, which of the following is NOT a key consideration?
Number of employees
What is the treatment for a contingent liability if its acquisition-date fair value cannot be measured reliably?
It is not recognized.
How is contingent consideration recorded?
At fair value.
What is the effect of a discovery of new information on the acquisition cost?
A retrospective change to goodwill, fair value of identifiable net assets, and fair value of NCI.
What is the treatment for errors discovered after the end of the measurement period?
A prior period item disclosure.
What is included in acquisition cost?
The amount of consideration plus contingent consideration.
What is the period of time allowed for measuring the fair value of assets and liabilities?
12 months.
This quiz covers the definitions and motives of business combinations, methods of arranging business combinations, the acquisition method, and disclosure requirements according to IFRS 3.
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