Which one of the following is a characteristic of a business combination that is accounted for as an acquisition?
A) Fair value only for items received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.
B) Fair value only for the consideration transferred by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.
C) Fair value for the consideration transferred by the acquirer as well as the fair value of items received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.
D) Fair value for only consideration transferred and identifiable assets received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company.
E) Only fair value of identifiable assets received enters into the determination of the acquirer's accounting valuation of the acquired company.

Question

Quizplus · Accepted Answer

In a business combination that is accounted for as an acquisition, the fair value for both the consideration transferred by the acquirer and the fair value of the items received by the acquirer (such as assets, liabilities, and equity interests) can enter into the determination of the acquirer's accounting valuation of the acquired company. This is in accordance with the fair value method of accounting for business combinations under GAAP.

Which One of the Following Is a Characteristic of a Business