In short
The acquisition method is how all business combinations are accounted for: identify the acquirer, set the acquisition date, measure the identifiable assets acquired, liabilities assumed and any noncontrolling interest at fair value, and recognize goodwill or a bargain purchase gain.
Key takeaways
- Acquisition-related costs, such as legal and advisory fees, are expensed.
- Costs of issuing debt or equity reduce the proceeds of that debt or equity.
- Contingent consideration is measured at fair value on the acquisition date.
Where it's tested
FAR: Business Combinations & Consolidations — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Acquirer purchases 100% of Target for $1,200,000 cash. Target's identifiable assets have a fair value of $1,600,000 and liabilities assumed have a fair value of $500,000. What should Acquirer recognize?