Accounting Chapter 2

Noncontrolling interests in consolidated financial statements

"____ ____ _ ___ ___ ___", amended Accounting Research Bulletin (ARB) No. 51. (now included in FASB ASC 810 [Consolidations]),

expensed

Both direct and indirect acquisitoin costs are ____

contingencies liabilities fair value

Current GAAP requires that all contractual ______, as well as non-contractual _____for which it is more likely than not that an asset or liability exists, be measured and recognized at ___ ___ on the acquisition date.

gain bargain provedures

Current requirements, FASB ASC paragraph 805-30-25-4: - Acquirer must reassess whether it has correctly identified all of the assets acquired and all of the liabilities assumed before recognizing a ___ on _____ purchases and - review _____ used to measure the amounts recognized at the acquisition date.

retrospectively

During the measurement period, acquirer is required to _____ adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed at the acquisition date.

assets liabilities acquisition date

During the measurement period, acquirer: Recognizes additional ___ or ___ if new information is obtained about facts and circumstances that existed at the ___ ___ which, if known, would have resulted in the recognition of those items.

restructuring costs

Expected ___ ___ (with no obligation at the acquisition date) are accounted for separately from the business combination.

noncontrolling interest 100%

FASB ASC 810 [Consolidations] established standard for the reporting of the __ ___ when the acquirer obtins control without purchasing ___ of the acquiree

seperate line item goodwill impairment operating section discontinued

FASB ASC paragraph 350-20-45-1 specifies the presentation of goodwill (if impairment occurs): - Aggregate amount of goodwill should be a __ ___ __in the balance sheet. - Aggregate amount of losses from __ ___ should be a separate line item in the ___ ____ of the income statement unless some of the impairment is associated with a _____ operation.

consideration

FASB ASC paragraph 805-10-25-23 excludes acquisition-related expenses from measurement of ____ paid

acquiree acquisition date onsideration assets liabilities future payments

FASB ASC paragraph 805-10-50-2 states that disclosure should include: - The fair value of the _____ and the basis for measuring that value on the ___ ___. - The fair value of the _____ transferred. - The amounts recognized at the acquisition date for each major class of ___ acquired and ____ assumed. - The maximum potential amount of ___ ___ the acquirer could be required to make.

acquiree acquisition date voting equity instruments business combination goodwill

FASB ASC paragraph 805-10-50-2 states that disclosure should include: - The name and a description of the _____. - The __ ___ - The percentage of __ ___ ___ acquired. - The primary reasons for the __ __, including a description of the factors that contributed to the recognition of ___.

deductible reporting segment

FASB ASC paragraph 805-30-50-1 requires: - Total amount of acquired goodwill and the amount expected to be _____ for tax purposes. - Amount of goodwill by ___ ___ (if the acquiring firm is required to disclose segment information), unless not practicable.

public

For ___ companies, goodwill is no longer amortized

tested for impairment

For public companies, Goodwill of each reporting unit is __ ___ ____on an annual basis

acquirer acquisition date acquiree assets liabilities

Four steps in the accounting for a business combination: 1) Identify the _____. 2) Determine the __ ___. 3) Measure the fair value of the _____. 4) Measure and recognize the ____ acquired and _____ assumed.

amortized downward impaired

Goodwill should not be _____ but should be adjusted _____ only when it is _____.

fair value of a reporting unit to its carrying amount (goodwill included).

The first step in determining goodwill impairment involves comparing the

current acquiree net assets consideration

A gain from the bargain purchase is reflected in ____ earnings of the _____ to the extent that the fair value of __ ___ exceeds the ____ paid.

should not annually (at minimum) impairment

Acquired intangible assets other than goodwill with an indefinite life (should/ should not) be amortized and should be tested ____ for _____

should impairement

Acquired intangible assets other than goodwill with limited useful life (should/ should not) be amortized over its useful economic life and should be reviewed for ____

error

After the measurement period ends: The acquirer only revises the accounting for a business combination to correct an ____.

reporting unit

All goodwill must be assigned to a __ __

goodwill

Any excess of total cost over the sum of amounts assigned to identifiable assets and liabilities is recorded as _____.

fair value date of acquisition

Identifiable assets acquired (including intangibles other than goodwill) and liabilities assumed should be recorded at their __ ___at the __ __ ____

pro forma at the beginning of the year at the beginning of the period comparative

If a material business combination occurred during the year, notes to financial statements should include on a __ ___basis: - Results of operations for the current year as though the companies had combined __ __ __ __ _ ___. - Results of operations for the immediately preceding period as though the companies had combined __ __ ___ __ __ ____ if ___ financial statements are presented.

provisional amounts

If initial accounting is incomplete by the end of the first reporting period: Acquirer should use ___ ___ in the financial statements for any item in which the accounting is incomplete.

1) Does potential impairment exist? 2) What is the amount of goodwill impairment?

Impairment should be tested in a two-step process. What are the two steps

one year from the acquisition date

Measurement Period cannot exceed:

the information it was seeking about the facts and circumstances not available

Measurement Period ends as soon as the acquirer __________________________ that existed at the acquisition date, or learns that more information is __ ___

Measurement Period

Period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination.

amortize 10 years impairment

Private companies can elect an alternative model: ____ goodwill over a period not to exceed __ ___ and utilize a simplified ____ model.

1) to provide information in the planning stages of the combination and 2) to disclose relevant information subsequent to the combination.

Pro forma statements (as-if statements) serve two functions in relation to business combinations:

additional consideration

Purchase agreements may provide that the purchasing company will give ___ ___ to the seller if certain future events or transactions occur.

single acquisition method

SFAS No. 141R supports the use of a ____ method. It uses the term ___ ____ rather than purchase method

amortized

SFAS No. 142, "Goodwill and Other Intangible Assets," - Goodwill acquired in a business combination since June 30, 2001, should not be ______.

141

SFAS No. ___, "Business Combinations," - pooling method is prohibited for business combinations initiated since June 30, 2001.

additional contributed capital premium discount

Security issuance costs are assigned to the valuation of the security, thus reducing what for stock issues or adjusting the ___ or ____ on bond issues.

assets liabilities noncontrolling interest consideration equity goodwill bargain

The Measurement Period provides the acquirer with a reasonable time to obtain the information necessary to identify and measure any of the following as of the acquisition date: A) Identifiable ___ acquired, ____ assumed, and any __ ___ in the acquiree. B) Any _____ transferred to the acquiree. C) In a business combination achieved in stages, any previous ____ interest held by the acquirer. D) The amount recognized as ____or the gain from a _____ purchase.

cash assets securities

The contingency consideration may require: - the payment of ____ (or other ____) - the issuance of additional ___

excluded from

The cost of issuing securities is (included in/ excluded from) the consideration.

business combination

The essence of the change suggests that the economic entity concept should be applied; thus (LBO) transactions are to be viewed as __ ___

fair value asset

Under current GAAP, in-process R&D is measured and recorded at ___ ___ as an ____ on the acquisition date.

facts circumstances impairment loss fair value nature amounts impairment

When an impairment loss occurs, FASB ASC paragraph 350-20-50-2 mandates note disclosure: - Description of ___ and ____ leading to the impairment. - Amount of __ ___ and method of determining the __ ___ of the reporting unit. - ___ and ___ of any adjustments made to _____ estimates from earlier periods, if significant.

bargain

When the price paid to acquire another firm is lower than the fair value of identifiable net assets (assets minus liabilities), the acquisition is referred to as a

eliminated

With a bargain acquisition, any previously recorded goodwill on the seller's books is _____

merged into the new corporation

With a leveraged buyout, what happens to the old corporation

fair value acquisition date

With the acquisition method, the __ __ of all assets and liabilities on the __ __, defined as the date the acquirer obtains control of the acquiree, are reflected on the financial statements.

Pro forma statements

as-if statements

leveraged buyout (LBO)

occurs when a group of employees (generally a management group) and third-party investors create a new company to acquire all the outstanding common shares of their employer company.

SFAS No. 141R "Business Combinations"

replaced FASB Statement No. 141