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Advanced
Financial
Accounting
Fourth Edition
This electronic
presentation
prepared by
Douglas Cloud,
Pepperdine
University
Task
Task Force
Force Clip
Clip Art
Art included
included in
in
this
this electronic
electronic presentation
presentation isis
used
used with
with the
the permission
permission of
of
New
New Vision
Vision Technology
Technology of
of
Nepean
Nepean Ontario,
Ontario, Canada
Canada
Corporate Expansion
and Accounting for
Business
Combinations
AAbusiness
businesscombination
combinationoccurs
occurs
when
whentwo
twoor
ormore
morecompanies
companies
join
joinunder
undercommon
commoncontrol.
control.
AA Company
AA Company
BB Company
Statutory Merger
AA Company
CC Company
BB Company
Statutory Consolidation
AA Company
AA Company
BB Company
BB Company
Stock Acquisition
Acquires
Stock
Yes
Acquired
Company
Liquidated?
No
Record as
Statutory Merger
or Statutory
Consolidation
Record as
Statutory Merger
or Statutory
Consolidation
10
Yes
Qualify
as Pooling?
Net Assets
Recorded at
Book Value
Acquires
Stock
No
Net Assets
Recorded at
Fair Value
Yes
Qualify
as Pooling?
Investment
Recorded at
Book Value
No
Investment
Recorded at
Fair Value
$510,000
11
12
110,000
100,000
475,000
40,000
25,000
Negative Goodwill
13
Total differential
$160,000
Cost of investment
$460,000
14
Pooling of Interest
An
Anexchange
exchangeof
of
common
commonstock.
stock.
What
Whatisisessential
essential
for
foraacombination
combinationto
to
be
beviewed
viewedas
asaa
pooling
poolingof
ofinterest?
interest?
Disclosure Requirements
The
The name
name and
and aa brief
brief description
description of
of the
the acquired
acquired
company.
company.
A
Astatement
statement that
that purchase
purchase treatment
treatment has
has been
been used.
used.
Information
Information on
on the
the total
total cost
cost incurred
incurred in
in making
making the
the
purchase.
purchase.
The
The portion
portion of
of the
the year
year for
for which
which operating
operating results
results
of
of the
the acquired
acquired company
company have
have been
been included.
included.
A
Adescription
description of
ofthe
the plan
plan for
for amortization
amortization of
of
goodwill
goodwill and
and the
the amortization
amortization method.
method.
Information
Information on
on any
any contingent
contingent payments
payments or
or
commitments
commitments and
and their
their accounting
accounting treatments.
treatments.
15
Operating
Operating results
results as
as ifif the
the
acquisition
acquisition had
had been
been made
made at
at
the
the start
start of
of the
the period.
period.
When
When comparative
comparative financial
financial
statements
statements are
are presented,
presented,
operating
operating results
results for
for the
the
preceding
preceding period
period as
as ifif the
the
acquisition
acquisition had
had occurred
occurred at
at
the
the start
start of
of the
the period.
period.
16
17
45,000
65,000
40,000
400,000
150,000
100,000
100,000
50,000
150,000
18
300,000
100,000
150,000
45,000
65,000
40,000
400,000
19
100,000
50,000
150,000
300,000
20
Chapter One
The
The
End
End