The Reporting Entity and Consolidated Financial Statements
Almost every company in the world today prepares consolidated financial statement. Most of the worlds corporate are thought to be single companies, closer examinations reveals that each actually is composed of a number of separate companies. For Example-General Motors Corporation and Ford Motor Company both own dozens of other companies. The Walt Disney Company is famous for spectacular theme parks and immortal cartoon characters, but it also owns many subsidiaries that include the following businesses : Miramax Films, Touchtone Pictures, Buena Vista Home Video, Hollywood Records, the ABC Television and radio stations
Identifying a business combination
An entity shall determine whether a transaction or other event is a business combination by applying the definition in this IFRS, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not a business, the reporting entity shall account for the transaction or other event as an asset acquisition.
The acquisition method
An entity shall account for each business combination by applying the acquisition method.
Applying the acquisition method requires:
(a) identifying the acquirer;
(b) determining the acquisition date;
(c) recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and (d) recognising and measuring goodwill or a gain from a bargain purchase.
Identifying the acquirer
For each business combination, one of the combining entities shall be identified as the acquirer. The guidance in IFRS 10 Consolidated Financial Statements shall be used to identify the acquirer—the entity that obtains control of another entity, i.e the acquiree. If a business combination has occurred but applying the guidance in IFRS 10 does not clearly indicate which of the combining entities is the acquirer,
Determining the acquisition date
The acquirer shall identify the acquisition date, which is the date on which it obtains control of the acquiree. The date on which the acquirer obtains control of the acquiree is generally the date on which the acquirer legally transfers the consideration, acquires the assets and assumes the liabilities of the acquiree—the closing date. However, the acquirer might obtain control on a date that is either earlier or later than the closing date. For example, the acquisition date precedes the closing date if a written agreement provides that the acquirer obtains control of the acquiree on a date before the closing date. An acquirer shall consider all pertinent facts and circumstances in identifying the acquisition date. Recognizing and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree
As of the acquisition date, the acquirer shall recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. Recognition of identifiable assets acquired and liabilities.
To qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Framework2 for the Preparation and Presentation of Financial Statements at the acquisition date. For example, costs the acquirer expects but is not obliged to incur in the future to effect its plan to exit an activity of an acquiree or to terminate the employment of or relocate an acquiree’s employees are not liabilities at the acquisition date. Therefore, the acquirer does not recognize those costs as part of applying the acquisition method. Instead, the Acquirer’s recognizes those costs in its post-combination financial statements in accordance with other IFRSs. In addition, to qualify for recognition as part of...
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