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Companies are continuously changing the composition of their assets and liabilities. Assets such as inventories are acquired on a regular basis while plant and equipment is acquitted less often. In other circumstances groups or bundles of assets or net assets are acquired. In order for AASB 3 to be applied the transaction must be considered to be a ‘business combination’ (Loftus, Leo, Picker, Wise & Clark, 2013, p.772).

Required:

1. With reference to the above statement describe what is meant by a business combinationAASB 3 Business Combinations.

1. Discussthe importance of identifying the acquirer of a business combination.(Consider the levels of controland the members’ rightsin your answer).

1. Comment on the fact there may be assets and liabilities that have not been recognised by the acquiree but are recognisable by the acquirer.  Give three examples to support your viewpoint.