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BUSINESS COMBINATION
Objective
1. Identify an acquirer
2. Determining the acquisition date
3. Recognition
4. Measurements of Assets and Liablities
Identify an acquirer
An acquirer is the entity that obtains control of the
entity- the acquiree. The power to govern the financial &
operating policies of an entity so as to obtained benefits
from its activities
Determining the Acquisition date
The acquisition date is defined as ‘the date on which the
acquirer obtains control of the acquiree,
which is normally the date on which the acquirer legally
transfer the consideration for the business
Recognition
Assets & liabilities recognized must be part of the
exchange transaction between the acquirer and the
acquiree and Not part of a separate transaction or
transactions
Intangible assets should be recognized by acquirer, the
one which is separable from entity or acquired by law or
contractual agreements.
Measurement of Assets & Liabilities
The measurement principle is that an acquirer measures
the identifiable tangible & intangible assets acquired and
the liabilities assumed
Recognition & Measurement of goodwill
A= Consideration paid
B= Identifiable assets & liablities recognised
If A>B = GOODWILL
B>A = gain from bargain purchases
Treatment of goodwill
It will be either be carried in the statement of financial
position at the amount recognizes
Or it will reduced as impairment losses are recognizes
Treatment of gain from bargain purchases
Gain from bargain purchases to be recognised in profit &
loss account ( not in capital reserved as per AS 14 & as
per Indian GAAP)