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Erstellt / Aktualisiert 03.04.2020 / 20.04.2020
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Fenster schliessen

A business combination...

  • refers to a transaction or other event in which an acquirer obtains control over one or more businesses.

  • is formed by a wide variety of transactions or events with various formats.

  • can differ widely in legal form.

  • unites two or more enterprises into a single economic entity that require consolidated financial statements.

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Reasons Firms Combine:

  • Vertical integration

  • Cost savings

  • Quick entry into new markets

  • Economies of scale

  • More attractive financing opportunities

  • Diversification of business risk

  • Business Expansion

  • Increasingly competitive environment

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Types of Business Combinations

statutory merger--> company A & company B = Company A

statutory consolidation--> Company A & Company B = Company C

Stock acquisition--> Company A & Company B = Company A is parent company of B

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Why Consolidate Financial Statements?

  • Consolidated financial statements provide more meaningful information than separate statements.

  • Consolidated financial statements more fairly present the activities of the consolidated companies.

  • Yet, consolidated companies may retain their legal identities as separate corporations.

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For statutory merger and statutory consolidation:

  • The acquired company ceases to be.

  • All appropriate account balances are physically consolidated in the financial records.

  • Consolidation is done only once.

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For stock acquisition:

  • The acquirer and acquired both remain financially and operationally


  • Only the financial statement information (on work papers, not the actual records) is consolidated.

  • Consolidation is done regularly for every reporting period.

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What if the consideration transferred does NOT EQUAL the Fair Value of the Assets acquired?

  • If the consideration is MORE than the Fair Value of the Assets acquired, the difference is attributed to GOODWILL

--> willing to pay more, why do you even pay more

  • If the consideration is LESS than the Fair Value of the Assets acquired, we got a BARGAIN!! And we will record a GAIN on the acquisition!!


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Gain from bargain purchase=

It means that there is a gain from the bargain purchase.

Fair value of net identifiable assets

- Total consideration transferred


=Gain from bargain purchase