CPA Financial Accounting and Reporting (FAR)

Certified Public Accountant Financial Accounting and Reporting examination.

Conceptual Framework of Financial AccountingFinancial Statement Preparation and PresentationRevenue Recognition
Accounting for Income TaxesLeases: Lessee and Lessor AccountingBusiness Combinations and Consolidation
Analyzing Financial StatementsApplying GAAP and IFRS to Real-World ScenariosEthics and Professional Responsibility in Financial Reporting
Mastering Multiple-Choice QuestionsTime Management on Exam DayApproaching Simulations and Case Studies
Conceptual Framework...Financial Statement ...Revenue RecognitionAccounting for Incom...Leases: Lessee and L...Business Combination...Analyzing Financial ...Applying GAAP and IF...Ethics and Professio...Mastering Multiple-C...Time Management on E...Approaching Simulati...
Advanced Topics

Business Combinations and Consolidation

Mergers, Acquisitions, and Group Reporting

When one company acquires another, accounting standards guide how to combine and report their financials.

Acquisition Method

  • Identify the acquirer and acquisition date.
  • Measure and recognize identifiable assets acquired and liabilities assumed at fair value.
  • Recognize goodwill or a gain from a bargain purchase.

Consolidation

The parent company must prepare consolidated financial statements, combining the results of all subsidiaries as if they were a single entity.

Real-World Application

Business combinations can significantly impact reported assets, liabilities, and earnings.

Examples

  • A tech giant acquiring a startup and recognizing goodwill on the consolidated balance sheet.

  • A conglomerate consolidating the financial results of its multiple subsidiaries.

In a Nutshell

Business combinations require combining companies as a single financial entity and recognizing goodwill or gains.

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Analyzing Financial Statements