Reference no: EM132488307 , Length: 1 page

Australian Accounting standard board issued AASB - 3 for the purpose of methods and steps of acquisition of one organization by another organization. In order to acquisition of business organization acquire and acquirer both need to follow the prescribe procedure as per AASB - 3. Procedures prescribed in AASB - 3 are as follow -

Key Steps of acquisition that need to be followed -

Part 1. Identification of combination of business - In the business acquisition one entity acquires the business of another entity and take control over business of acquire. In acquisition deal both the separate business entity become one reporting entity. In order to identification of business combination one need to identify the fair value of assets of business organization based on the assets and liabilities of acquire business.

Part 2. Identification of control over business combination - After the acquisition deal both the organization comes under the common control which can be controlled by single entity or may be by combination of both the entity. Hence we can say that acquisition is just not transitory rather control of business organization also has been changed hence one need to identify the controlling entity over resulting organization.

Part 3. Accounting Method - Third steps of acquisition is identification of accounting method to be followed. In general purchase method has been followed by acquirer in which acquirer considered net assets of acquiree after deduction of liabilities and contingent liabilities which may be arise in near future. Based on all the calculation fair market value of Acquiree Company has been identified.

Part 4. Purchase Method - Purchase method involve

a. Identification of acquirer
b. Calculation of value of business combination
c. Decide date of acquisition and cost of business combination at acquisition date considering the assets, liabilities and contingent liabilities of the firm

Part 5. Identification of Acquirer - Acquirer need to be identified in all the business acquisition transitions. Acquirer is a person who takes control over business separately or in combination of both the organization.

Part 6. Calculation of cost of business combination - Cost of business combination includes the fair market value of business combination at the date of acquisition which shall be paid by directly or in combination of equity and other exchange control by acquirer as decided.