Reference no: EM132950892

Problem 1: Which of the following statements concerning the identification of the acquirer is a business combination is correct?

a) In business combination through merger, the acquirer is the absorbed corporation after the business combination.
b) In business combination effected primarily by transferring assets or by incurring liabilities or issuing shares, the acquirer is usually the entity that transfers the cash, incurs the liabilities or issues the shares.
c) In some business combination commonly called "reverse acquisition" the issuing entity is the acquiree while the other entity that receives the issued shares is the acquirer.
d) In business combination through consolidation, the acquirer is the newly formed corporation.

Problem 2: How shall an acquirer in a business combination account for the changes in fair value contingent consideration classified as financial liability if the changes result from events after the acquisition date?

a) The changes in fair value of contingent consideration classified as financial liability shall be retrospectively restated to beginning retained earnings because they are prior period errors.
b) The changes in fair value of contingent consideration classified as financial liability shall be recognized as gain or loss in profit or loss because they are not measurement period adjustments.
c) The changes in fair value of contingent consideration classified as financial liability shall be retroactively applied to beginning retained earnings because they are change in accounting policy.
d) The changes in fair value of contingent consideration classified financial liability shall be retroactively adjusted to goodwill/gain on bargain purchase because they are measurement period adjustments.