Option backdating and managerial compensation

Which of the following situations best describes a business combination to be accounted for as a statutory merger? Both companies in a combination continue to operate as separate, but related, legal entities. Only one of the combining companies survives and the other loses its separate identity. Two companies combine to form a new third company, and the original two companies are dissolved. One company transfers assets to another company it has created. A firm can use which method of financing for an acquisition structured as either an asset or stock acquisition? to improve the relevance, comparibility, and transparency of financial information related to business combinations. Which of the following statements would not be a valid or logical reason for entering into a business combination? to provide information relevant to the controlling stockholders. to represent the view that the affiliated companies are a separate, identifiable economic entity. to emphasis control of the whole by a single management. to include only a portion of the subsidiary’s assets, liabilities, revenues, expenses, gains, and losses.

(2) Pierce is willing to pay for excess earnings for an expected life of 4 years, which should be capitalized at the industry normal rate of return. Compute noncontrolling interest in consolidated income for 2011. Compute noncontrolling interest in net assets on December 31, 2011. Estimating the value of goodwill to be included in an offering price can be done under several alternative methods. Identify the steps used in this approach to estimate goodwill. The two alternative views of consolidated financial statements are the parent company concept and the economic entity concept. Business combinations may be classified into three types based upon the relationships among the combining entities (e.g., combinations with suppliers, customers, competitors, etc.).

The objectives of FASB 141R (Business Combinations) and FASB 160 (Non Controlling Interests in Consolidated Financial Statements) are as follows: a.

to facilitate the convergence project of the FASB and the International Accounting Standards Board.

to reduce risk by acquiring established product lines. the operating costs of the combined entity would be more than the sum of the separate entities. The parent company concept of consolidation represents the view that the primary purpose of consolidated financial statements is: a.

Total elimination is consistent with the parent company concept. Partial elimination is consistent with the economic unit concept. Past accounting standards required the total elimination of unrealized intercompany profit in assets acquired from affiliated companies.

A business combination in which the boards of directors of the potential combining companies negotiate mutually agreeable terms is a(n) a.

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