Business Combinations and Group Financial Statements

Introduction and Context

A business combination occurs when an acquirer obtains control of one or more businesses. It is economically significant because the transaction changes the reporting entity, introduces new assets and liabilities into the acquirer’s financial statements, and may create goodwill. Once control is obtained, the acquirer generally presents the acquiree’s assets, liabilities, income and expenses together with its own in consolidated financial statements.

This chapter is primarily based on the principles of IFRS 3 Business Combinations, IFRS 10 Consolidated Financial Statements, IAS 28 Investments in Associates and Joint Ventures, and IFRS 11 Joint Arrangements. Local legislation and other reporting frameworks may differ, so professional application requires reference to the standards adopted in the relevant jurisdiction.

The central accounting challenge is to distinguish between:

• acquiring control of a business;
• acquiring an asset or group of assets that is not a business;
• holding significant influence over an investee; and
• sharing control under a joint arrangement.

The resulting accounting differs substantially. A subsidiary is consolidated, an associate is normally accounted for using the equity method, and a joint operation is accounted for by recognising the investor’s direct rights and obligations.

Learning Objectives

By the end of this chapter, the reader should be able to:

1. Explain the meaning of a business combination and identify the acquirer and acquisition date.
2. Apply the acquisition method, including recognition and measurement of identifiable assets, liabilities and non-controlling interests.
3. Calculate goodwill or a gain from a bargain purchase.
4. Prepare essential consolidation adjustments and eliminate intragroup transactions.
5. Account for subsidiaries, associates, joint ventures and joint operations.
6. Analyse post-acquisition profits, fair-value adjustments and non-controlling interests.
7. Evaluate professional, governance and reporting issues in group financial statements.

1. The Reporting Entity and the Meaning of Control

1.1 Group financial statements

A group consists of a parent and its subsidiaries. Consolidated financial statements present the group as a single economic entity, even though the entities remain legally separate. This perspective prevents the group from reporting transactions with itself as if they were transactions with external parties.

Separate financial statements, by contrast, report the parent as an individual legal entity. An investment in a subsidiary may be measured in separate financial statements in accordance with the applicable standard, often at cost, under IFRS 9, or using the equity method where permitted. Consolidated and separate financial statements answer different questions and should not be confused.

1.2 Control under IFRS 10

An investor controls an investee when all three conditions are present:

1. the investor has power over the investee;
2. the investor has exposure, or rights, to variable returns from its involvement; and
3. the investor can use its power to affect those returns.

Power usually arises from voting rights, but it may also arise through contractual rights, potential voting rights, or decision-making arrangements. A majority of voting rights is strong evidence of power, but it is not conclusive. Conversely, control may exist without a majority interest where other shareholders are widely dispersed or the investor has substantive contractual rights.

Control is assessed using the facts and circumstances at the reporting date. It is not determined only by legal ownership. Protective rights, such as a lender’s right to restrict unusual activities, generally do not create power because they protect the holder without giving it the ability to direct relevant activities.

1.3 Business or asset acquisition

A business is an integrated set of activities and assets capable of being conducted and managed to provide goods or services, generate investment income, or produce other ordinary income. The accounting distinction matters because a business combination requires acquisition accounting and may produce goodwill. An asset acquisition generally allocates the purchase price to identifiable assets and liabilities and does not create goodwill.

A concentration test may, where applicable under IFRS 3, provide a simplified basis for concluding that an acquired set is not a business. If substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets, the set may be treated as an asset acquisition. The test is optional, and a failed test does not automatically prove that the set is a business; the substantive-process assessment is then required.

2. The Acquisition Method

The acquisition method is applied at the acquisition date—the date on which control transfers to the acquirer. It has four broad stages:

1. identify the acquirer;
2. determine the acquisition date;
3. recognise and measure the identifiable assets acquired, liabilities assumed and non-controlling interests; and
4. recognise and measure goodwill or a bargain-purchase gain.

2.1 Identifying the acquirer

The acquirer is the entity that obtains control. In a straightforward cash purchase, this is usually the entity paying cash. In a share exchange or reverse acquisition, the analysis may identify the legal acquiree as the accounting acquirer. The assessment considers voting rights, the composition of the governing body and senior management, the relative size of the entities, and which party transferred cash or other consideration.

2.2 Consideration transferred

Consideration may include cash, other assets, liabilities incurred to former owners, and equity instruments issued by the acquirer. Contingent consideration is recognised at acquisition-date fair value when it forms part of the consideration transferred. Subsequent measurement depends on its classification. A liability within IFRS 9 is generally remeasured through profit or loss, whereas an equity-classified instrument is not subsequently remeasured.

Acquisition-related costs—such as legal, advisory, accounting and valuation fees—are generally expensed as incurred. Costs of issuing debt or equity are accounted for under the relevant financial-instrument requirements and are not simply treated as acquisition costs.

2.3 Identifiable assets and liabilities

At acquisition, identifiable assets acquired and liabilities assumed are recognised separately from goodwill if they meet the recognition criteria and can be measured reliably. The general measurement basis is acquisition-date fair value, subject to specific exceptions. Examples of identifiable items that may not have appeared in the acquiree’s own accounts include:

• internally developed brands;
• customer relationships;
• patented technology;
• favourable or unfavourable contracts; and
• certain contingent liabilities.

Deferred tax assets and liabilities are recognised under IAS 12. Employee benefit obligations are measured under IAS 19. Assets held for sale are measured under IFRS 5. Leases are considered under IFRS 16. These exceptions demonstrate why acquisition accounting requires more than simply copying the acquiree’s statement of financial position.

2.4 Measurement period

If acquisition-date accounting is incomplete, provisional amounts may be reported. During the measurement period, which cannot exceed one year from the acquisition date, adjustments are made retrospectively when they result from information about facts and circumstances existing at the acquisition date. Changes arising from new events after that date are not measurement-period adjustments; they are accounted for under the applicable subsequent standard.

3. Goodwill and Bargain Purchases

Goodwill represents future economic benefits arising from assets that are not individually identified and separately recognised. It may reflect expected synergies, an assembled workforce, access to markets, economies of scale, or the value of expected growth.

The general goodwill calculation is:

Here, NCI means non-controlling interest. The calculation applies to a business combination achieved in stages and assumes that all components are measured consistently at acquisition-date fair value where required.

If the result is positive, goodwill is recognised as an asset. If the result is negative, management must first reassess the identification and measurement of all elements and confirm that no consideration or asset has been omitted. Only after that reassessment is a bargain-purchase gain recognised in profit or loss.

Worked Example 1: Goodwill

Parent acquires 80% of Subsidiary for cash consideration of CU 9.6 million. The fair value of the identifiable net assets at acquisition is CU 10.5 million. The fair value of the 20% non-controlling interest is CU 2.3 million.

The group recognises identifiable net assets of CU 10.5 million, NCI of CU 2.3 million and goodwill of CU 1.4 million. The calculation uses the full-goodwill method because NCI is measured at fair value.

Partial-goodwill method

Where permitted, NCI may be measured at its proportionate share of the acquiree’s identifiable net assets rather than at fair value. Under this method, goodwill reflects only the parent’s interest:

Using the facts above:

The choice between full and partial goodwill affects reported goodwill and NCI but does not alter the identifiable net assets recognised.

4. Non-Controlling Interests

Non-controlling interests are equity interests in a subsidiary that are not attributable, directly or indirectly, to the parent. NCI is presented within equity but separately from equity attributable to owners of the parent.

NCI may be measured at:

• fair value; or
• its proportionate share of the acquiree’s identifiable net assets, where the relevant standard permits the choice.

After acquisition, total comprehensive income is allocated between the parent and NCI even if the allocation gives NCI a deficit balance. Transactions with NCI that do not result in loss of control are equity transactions. No gain or loss is recognised in profit or loss, and no new goodwill arises.

When control is lost, the parent derecognises the subsidiary’s assets, liabilities and NCI; recognises consideration received; recognises any retained investment at fair value; and records the resulting gain or loss in profit or loss. The retained investment is then accounted for under the appropriate standard.

5. Consolidation Procedures

Consolidation begins with the parent’s and subsidiaries’ financial statements, normally prepared using consistent accounting policies and reporting dates. The principal procedures are as follows.

5.1 Combine like items

The group adds similar assets, liabilities, equity, income, expenses and cash flows line by line. The subsidiary’s equity at acquisition is not simply added to the group’s equity because it is replaced by the acquisition analysis and NCI presentation.

5.2 Eliminate the parent’s investment

The parent’s investment balance is eliminated against the parent’s share of the subsidiary’s pre-acquisition equity. The difference, after fair-value adjustments and NCI, contributes to goodwill or a bargain-purchase gain.

5.3 Recognise fair-value adjustments

Fair-value adjustments at acquisition affect subsequent consolidated results. For example, if plant has a fair value CU 1 million above carrying amount and five years of useful life remain, additional annual depreciation is:

The adjustment reduces consolidated profit and the carrying amount of the asset after acquisition. It also affects the allocation of post-acquisition profit between the parent and NCI.

5.4 Eliminate intragroup balances and transactions

All intragroup balances and transactions are eliminated in full, regardless of the percentage ownership held by the parent. Eliminations include:

• receivables and payables;
• loans and accrued interest;
• sales and purchases;
• management fees and dividends;
• unrealised profit in inventory; and
• unrealised profit on transfers of non-current assets.

The objective is to report only transactions with external parties.

Worked Example 2: Intragroup inventory profit

Parent sells goods to Subsidiary for CU 600,000. Parent’s cost was CU 450,000. At year-end, Subsidiary still holds 40% of the goods.

Total intragroup profit is:

The unrealised profit in closing inventory is:

The consolidation adjustment reduces group inventory by CU 60,000 and reduces group profit by CU 60,000. The sale itself is also eliminated by removing intragroup revenue and cost of sales. If the sale was from a subsidiary to the parent, the effect on profit allocation between the parent and NCI must also be considered because the unrealised profit originated in the subsidiary.

5.5 Intragroup dividends

Dividends declared by a subsidiary to its parent are income in the parent’s separate records but are not group income. They are eliminated against the corresponding dividend distribution. Dividends paid to NCI remain distributions to an external ownership interest and are not eliminated as intragroup income.

5.6 Deferred tax on consolidation adjustments

A consolidation adjustment can create a temporary difference. For example, eliminating unrealised inventory profit lowers the consolidated carrying amount of inventory without changing its tax base in some jurisdictions. The resulting deferred tax effect is recognised under IAS 12. Ignoring this effect can overstate or understate consolidated profit and equity.

6. Associates and the Equity Method

An associate is an investee over which the investor has significant influence but not control or joint control. Significant influence is the power to participate in financial and operating policy decisions. A holding of 20% or more of voting power creates a rebuttable presumption of significant influence, although facts and circumstances remain decisive.

Under the equity method, the investment is initially recognised at cost and subsequently adjusted for the investor’s share of the associate’s post-acquisition profit or loss and other comprehensive income. Dividends received reduce the carrying amount rather than being recognised as dividend income in consolidated profit or loss.

A simplified carrying amount formula is:

The formula assumes no impairment, disposals, additional investments or other changes. Such items must be incorporated separately when relevant.

Worked Example 3: Equity method

An investor acquires 30% of an associate for CU 4 million. During the year, the associate reports profit of CU 1.2 million and pays dividends of CU 0.3 million.

Investor’s share of profit:

Investor’s share of dividends:

Closing carrying amount, before impairment and other adjustments:

The investor recognises CU 0.36 million as its share of profit and reduces the investment by CU 0.09 million for dividends received.

Unrealised profits from transactions between an investor and its associate are eliminated to the extent of the investor’s interest, subject to the requirements of the applicable standards. Impairment indicators are assessed for the investment as a whole, rather than mechanically applying the parent’s ordinary goodwill impairment process to a separately recognised goodwill balance.

7. Joint Arrangements

A joint arrangement exists when two or more parties have joint control, meaning that decisions about relevant activities require unanimous consent of the parties sharing control. IFRS 11 distinguishes between a joint operation and a joint venture.

A joint operator recognises its share of jointly held assets, liabilities, revenue and expenses, together with assets and liabilities incurred directly. A joint venturer recognises an investment and applies the equity method, subject to the relevant standards.

The classification depends on rights and obligations, not merely the legal name of the arrangement. A separate vehicle may still be a joint operation if the contractual terms and other facts give the parties direct rights to assets and direct responsibility for liabilities.

8. Acquisition Through a Group Structure

When a subsidiary acquires another entity, the group must identify the ultimate parent, the direct parent and the relevant reporting perspective. A subsidiary’s acquisition of a business can change consolidated assets and liabilities even if the ultimate parent’s ownership percentage does not change.

Transactions between entities under common control require particular care. IFRS 3 does not prescribe a comprehensive accounting model for all common-control combinations. Practice may include predecessor accounting or acquisition-style accounting, depending on jurisdiction, regulatory requirements and the reporting objective. Professional judgement and consistent policy application are essential.

9. Detailed Illustrative Case: Northstar Group

Background

Northstar Ltd acquires 75% of Meridian Ltd on 1 January 20X5 for CU 15 million cash. Meridian is a business. At acquisition, Meridian’s identifiable net assets have a book value of CU 16 million, but their fair value is CU 18 million. The fair-value uplift relates to machinery with four years of remaining useful life. The fair value of NCI is CU 4.2 million.

During 20X5, Meridian reports profit of CU 3 million. Northstar sells inventory to Meridian for CU 2 million; the inventory cost Northstar CU 1.4 million. One-quarter of the inventory remains unsold at year-end. Meridian pays Northstar CU 0.5 million in dividends during the year.

Analysis and solution

Goodwill.

Additional depreciation. The fair-value uplift is CU 2 million. The annual additional depreciation is:

Meridian’s adjusted post-acquisition profit is therefore CU 2.5 million before the inventory elimination.

Unrealised inventory profit. Northstar’s profit on the sale is CU 0.6 million. One-quarter remains unsold:

Consolidated profit is reduced by CU 0.15 million and inventory is reduced by the same amount.

Adjusted post-acquisition profit.

Assuming the inventory transaction is downstream from the parent to the subsidiary, the adjustment to group profit is attributable to the parent. The adjusted subsidiary profit of CU 2.5 million is allocated 75% to the parent and 25% to NCI before considering the downstream unrealised profit adjustment:

The parent’s consolidated share is then reduced by the CU 0.15 million downstream unrealised profit adjustment. The dividend received by Northstar is eliminated as group income and reduces the investment relationship; it is not group revenue.

Outcome

Northstar’s consolidated financial statements include Meridian’s assets, liabilities, income and expenses from 1 January 20X5. They also include CU 1.2 million goodwill, the machinery fair-value adjustment net of additional depreciation, NCI, and the required intragroup eliminations.

Learning points

The case demonstrates that consolidation is not a mechanical addition of trial balances. Acquisition-date fair values affect later depreciation, intragroup transactions affect reported inventory and profit, and NCI participates in post-acquisition results. The direction of an intragroup sale also affects the allocation of the elimination between the parent and NCI.

10. Impairment and Subsequent Measurement of Goodwill

Goodwill is not amortised under IFRS. It is allocated to cash-generating units or groups of cash-generating units expected to benefit from the combination and tested for impairment under IAS 36 when required, and at least annually for goodwill.

An impairment loss is recognised when the carrying amount of the relevant cash-generating unit exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs of disposal and value in use. An impairment loss is first allocated to reduce goodwill and then allocated pro rata to other assets, subject to restrictions in IAS 36. Impairment losses recognised for goodwill are not reversed in later periods under IFRS.

This treatment creates a management incentive to allocate goodwill carefully and to use realistic forecasts. Overly optimistic cash-flow projections can delay impairment recognition and undermine faithful representation.

11. Professional Judgement, Governance and Ethics

Business combinations involve estimates and judgement in areas such as:

• identifying the acquirer;
• determining whether an acquired set is a business;
• valuing contingent consideration;
• estimating the fair value of brands, customer relationships and technology;
• selecting useful lives and residual values;
• measuring NCI; and
• allocating goodwill to cash-generating units.

These judgements can materially affect reported assets, liabilities, profit, leverage and performance measures. Independent valuation specialists may be appropriate, but responsibility remains with management and those charged with governance.

Ethical risks include deliberately classifying an asset acquisition as a business combination to create an accounting result that management prefers, understating liabilities, overstating synergies, or delaying goodwill impairment. Strong governance requires documented assumptions, sensitivity analysis, audit committee challenge, transparent disclosures and effective controls over consolidation journals.

IFRS 3 requires disclosures that enable users to evaluate the nature and financial effects of business combinations. These commonly include the acquisition date, consideration, major classes of consideration, recognised assets and liabilities, goodwill, NCI, revenue and profit contributed by the acquiree, and pro forma information where required.

12. Technology, Data and Contemporary Practice

Large groups commonly use consolidation software or enterprise-resource-planning systems to automate data collection, currency translation, mapping of charts of accounts and elimination entries. Automation improves speed and control but does not replace accounting judgement.

Artificial intelligence can assist with anomaly detection, matching intercompany balances, identifying unusual journal entries and reviewing acquisition contracts. However, AI outputs require human validation because models may misclassify transactions, reproduce biased assumptions, or fail to understand contractual rights that determine control. Audit trails, access controls, model governance and data lineage are essential.

Contemporary reporting also places greater emphasis on acquisition-date transparency, climate-related assumptions, cyber risks, intangible assets and the quality of management forecasts. These matters may influence fair values and impairment assessments even when they are not presented as separate line items.

13. Limitations and Best Practices

Consolidated statements have limitations. They may conceal differences in profitability, liquidity and risk among subsidiaries. Goodwill is a residual amount and does not provide a direct measure of identifiable economic resources. Fair-value estimates can be highly sensitive to discount rates and forecast growth. Consolidation also cannot eliminate the legal, tax and regulatory consequences of separate entities.

Best practice includes:

1. documenting the control assessment and acquisition-date conclusions;
2. establishing a detailed purchase-price allocation process;
3. reconciling legal-entity records to consolidation records;
4. maintaining formal intercompany confirmation procedures;
5. reviewing fair-value adjustments for subsequent depreciation or amortisation;
6. testing goodwill impairment using realistic, supportable assumptions;
7. reconciling NCI movements and ownership changes;
8. applying consistent accounting policies and reporting dates; and
9. explaining significant judgements and estimation uncertainty clearly.

Chapter Summary

Business combinations require the acquisition method: identify the acquirer and acquisition date, recognise identifiable assets and liabilities at the appropriate acquisition-date measurements, recognise NCI, and calculate goodwill or a bargain-purchase gain. Goodwill is the residual arising from consideration, NCI and any previously held interest compared with identifiable net assets.

Consolidated financial statements portray a parent and its subsidiaries as one economic entity. The parent’s investment is eliminated, subsidiary equity is analysed between pre- and post-acquisition components, fair-value adjustments are carried forward, and all intragroup balances and unrealised profits are eliminated. NCI is presented within equity and shares in post-acquisition results.

Associates are normally accounted for using the equity method, while joint arrangements are classified according to the parties’ rights and obligations as joint operations or joint ventures. Professional judgement is central to control assessments, valuation, impairment testing and disclosures. Effective governance, transparent assumptions and carefully controlled technology are necessary for reliable group reporting.

Key Terms

Business combination: A transaction or event in which an acquirer obtains control of one or more businesses.

Acquirer: The entity that obtains control of the acquiree.

Acquisition date: The date on which control of the acquiree transfers to the acquirer.

Acquiree: The business or businesses over which control is obtained.

Control: Power over an investee, exposure to variable returns, and the ability to use power to affect those returns.

Subsidiary: An entity controlled by another entity.

Parent: An entity that controls one or more subsidiaries.

Consolidated financial statements: Financial statements presenting a parent and its subsidiaries as one economic entity.

Non-controlling interest: Equity in a subsidiary not attributable to the parent.

Goodwill: Future economic benefits from assets not individually identified and separately recognised.

Bargain purchase: A business combination in which the reassessed fair value of net assets exceeds the relevant acquisition amounts.

Fair-value adjustment: An acquisition-date adjustment bringing an asset or liability to its required fair value.

Measurement period: The period, limited to one year, for finalising provisional acquisition accounting.

Associate: An investee over which the investor has significant influence but not control.

Equity method: A method recognising the investor’s share of an investee’s post-acquisition results and adjusting the investment carrying amount.

Joint control: Contractually agreed sharing of control requiring unanimous consent for relevant activities.

Joint operation: A joint arrangement in which parties have rights to assets and obligations for liabilities.

Joint venture: A joint arrangement in which parties have rights to the net assets.

Intragroup transaction: A transaction between entities within the same group.

Cash-generating unit: The smallest identifiable group of assets generating largely independent cash inflows for impairment testing.

Review Questions

Short Answer Questions

1. What three conditions must be present for control under IFRS 10?
2. Distinguish a business acquisition from an asset acquisition.
3. Why are acquisition-related legal and advisory costs generally expensed?
4. How does NCI differ from the parent’s equity?
5. Why are dividends from a subsidiary eliminated on consolidation?

Long Answer Questions

1. Explain the acquisition method and discuss the principal recognition and measurement exceptions.
2. Compare the full-goodwill and partial-goodwill methods, including their effects on NCI and reported goodwill.
3. Describe the consolidation process from combining line items through eliminating intragroup transactions.
4. Explain the equity method for associates and compare it with consolidation of a subsidiary.
5. Discuss the governance and ethical risks associated with fair-value measurement and goodwill impairment.

Analytical / Application Questions

1. A parent acquires 70% of a subsidiary for CU 8 million. The fair value of identifiable net assets is CU 9 million and the fair value of NCI is CU 2.4 million. Calculate goodwill and explain the acquisition-date entries required.
2. A parent sells goods costing CU 500,000 to its subsidiary for CU 700,000. One-third remains in closing inventory. Identify the consolidation adjustments and explain their effect on group profit and inventory.
3. An investor owns 25% of an investee. The investee reports profit of CU 2 million and pays dividends of CU 400,000. Calculate the investor’s share of profit and dividends and explain the effect on the investment carrying amount.

Multiple Choice Questions with Answers

Question 1

Which combination of conditions establishes control under IFRS 10?

A. Ownership of more than 50% of ordinary shares only

B. Power, exposure to variable returns, and ability to use power to affect returns

C. Significant influence, legal ownership, and dividend income

D. Joint control, fair value measurement, and contractual rights

Correct Answer: B. Power, exposure to variable returns, and ability to use power to affect returns

Question 2

An acquirer pays CU 12 million for a business. The fair value of identifiable net assets is CU 10 million and the fair value of NCI is CU 3 million. What goodwill is recognised under the full-goodwill method?

A. CU 1 million

B. CU 2 million

C. CU 3 million

D. CU 5 million

Correct Answer: C. CU 3 million

Question 3

Which item is generally eliminated in full on consolidation?

A. Dividends paid by a subsidiary to external shareholders

B. A parent’s sale to an unrelated customer

C. An intragroup receivable and corresponding payable

D. A subsidiary’s tax payable to the government

Correct Answer: C. An intragroup receivable and corresponding payable

Question 4

A parent sells inventory costing CU 80,000 to a subsidiary for CU 100,000. Half remains unsold. What unrealised profit must be eliminated?

A. CU 10,000

B. CU 20,000

C. CU 40,000

D. CU 50,000

Correct Answer: A. CU 10,000

Question 5

Under the equity method, dividends received from an associate are normally:

A. Recognised as group revenue

B. Added to the investment carrying amount

C. Deducted from the investment carrying amount

D. Recognised as goodwill

Correct Answer: C. Deducted from the investment carrying amount

Question 6

Which statement best describes a joint operation?

A. The investor has rights only to net assets

B. The investor recognises its share of relevant assets, liabilities, revenue and expenses

C. The investor always consolidates 100% of the arrangement

D. The investor recognises only dividend income

Correct Answer: B. The investor recognises its share of relevant assets, liabilities, revenue and expenses

Question 7

A fair-value uplift of CU 1.5 million relates to equipment with three years of remaining useful life. What additional annual depreciation is required?

A. CU 0.25 million

B. CU 0.5 million

C. CU 1.0 million

D. CU 4.5 million

Correct Answer: B. CU 0.5 million

Question 8

What is the usual accounting treatment when control of a subsidiary is lost?

A. Continue consolidating the subsidiary indefinitely

B. Recognise the retained investment at its original cost only

C. Derecognise the subsidiary’s net assets and NCI and recognise the resulting gain or loss

D. Transfer all subsidiary assets to goodwill

Correct Answer: C. Derecognise the subsidiary’s net assets and NCI and recognise the resulting gain or loss

Question 9

Which statement about goodwill under IFRS is correct?

A. It is amortised over five years in all cases

B. It is tested for impairment and is not amortised

C. It is recognised in every asset acquisition

D. It is measured at the subsidiary’s historical cost

Correct Answer: B. It is tested for impairment and is not amortised

Question 10

A bargain-purchase gain may be recognised only after the acquirer has:

A. Eliminated all NCI permanently

B. Reassessed the identification and measurement of the relevant acquisition amounts

C. Transferred goodwill to retained earnings

D. Received dividends from the acquiree

Correct Answer: B. Reassessed the identification and measurement of the relevant acquisition amounts