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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 ot

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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 combinatio...

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Question Preview:

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.

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Solution preview

The purpose of AASB 3 Business combinationhas been to improve the reliability, relevance as well as comparability of the information which he reporting entity provides in the financial statements in respect of the business combination and their effects.In order to accomplish this purpose, it has found that the AASB 3 establishes some principles as well as requirements in regard to how the same to be conduct (AASB 3, 2015)

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