In short
In a reverse acquisition, the company that legally issues shares is the acquiree for accounting purposes, because the owners of the other company end up controlling the combined entity, as when a private company merges into a public shell.
Key takeaways
- The consolidated statements continue those of the legal subsidiary (the accounting acquirer).
- Equity is adjusted to show the legal parent's share structure.
- Consideration is measured as the shares the accounting acquirer would have had to issue.
Where it's tested
BAR: Business Combinations (Advanced) — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A parent owning 80% of a subsidiary purchases an additional 10% from noncontrolling shareholders for an amount exceeding the carrying value of the interest acquired. How is the excess recorded?