Question

What is the accounting valuarion basis for consolidating assets and liabilities in a business combination? please explain in detail

Answer 1

Answer-A business combination is the process of forming a single economic entity by merging two or more organizations under common ownership.There are different types of legal arrangements that can take place to create a business combination:-(1)- A statutory merger is created whenever two or more companies come together to form a business combination.(2)-A statutory merger can also be produced by the acquisition of a company's capital stock. (3)- A statutory consolidation results when two or more companies transfer all of their assets or capital stock to a newly formed corporation. The original companies are being "consolidated" into the new entity. (4) A business combination is also formed whenever one company gains control over another through the acquisition of outstanding voting stock.

Acquisition method is the method to account for a business combination. Consolidated financial statements are prepared to achieve this objective. US GAAP and IFRS require the consolidated financial statements to be prepared under the acquisition method.The acquisition method allocates the fair value of the consideration transferred to the separately recognized assets acquired and liabilities assumed based on their individual fair value.