PFRS 3 – BUSINESS COMBINATION THEORIES

1. According to PFRS 3, it is a transaction or other event in which an acquirer

obtains control of one or more businesses.
A. Business combination
B. Business amalgamation
C. Business alliance
D. All of these
2. This distinguishes a business combination from other types of investment
transactions.
A. Acquisition of assets
B. Acquisition of stocks
C. Obtaining control
D. All of these
3. A business combination can be affected through
A. Purchase of all the assets and assumption of all liabilities of an acquiree by
the acquirer.
B. Purchase of all or some of the voting shares of the acquiree, sufficient for the
acquirer to obtain control over the acquiree.
C. Acquisition of control without transfer of consideration.
D. Any of these
4. After this type of business combination, the acquired entity ceases to exist as
separate legal or accounting entity. The acquirer records in its accounting records
the assets acquired, and liabilities assumed in the business combination.
A. Stock acquisition
B. Acquisition of control without transfer of consideration
C. Combination of mutual entities
D. Asset acquisition
5. It is a statutory type of combination which occurs when two or more companies merge
into a single entity which shall be one of the combining companies.
A. Merger
B. Consolidation
C. Stock acquisition
D. Mutual combination
6. It is a statutory type of combination which occurs when two or more companies merge
into a single entity which shall be the consolidated company.
A. Merger
B. Consolidation
C. Stock acquisition
D. Mutual combination
7. PFRS 3 requires a business combination to be accounted for using the
A. Purchase method
B. Acquisition method
C. Goodwill method
D. Control method
8. The acquisition method requires which of the following
A. Identify the acquirer
B. Determining the acquisition date
C. Recognizing and measuring the identifiable assets acquired, the liabilities
assumed and any non-controlling interest in the acquiree
D. Recognizing and measuring goodwill or a gain from a bargain purchase
E. All of these
9. It refers to the entity that obtains control after the business combination.
A. Acquired
B. Acquiree
C. Acquirer
D. All of these
10. According to PFRS 3, this is the date on which the acquirer obtains control of the
acquiree
A. Control date
B. Acquisition date
C. Date of purchase
D. Birth date
11. According to PFRS 3, the acquisition date is normally the
A. Control date
B. Purchase date
C. Closing date
D. Valentine’s date
12. The identifiable assets acquired, and liabilities assumed in a business combination
are generally measured at
Source: Advance Accounting - Zeus Vernon Millan
 A. Acquisition-date fair values
B. Previously carrying amounts
C. Fair value less cost to sell
D. Cost
13. Which of the following assets of an acquiree may not be included when computing for
the goodwill arising from a business combination?
A. Capitalized kitchen utensils and equipment
B. Intangible assets not previously recorded
C. Research and development cost charged as expense
D. Goodwill
14. If as part of a business combination, an acquirer reacquires a right that it had
previously granted to the acquiree, such reacquired right is
A. An identifiable intangible asset subsumed in goodwill
B. An unidentifiable intangible asset that the acquirer recognizes as direct
adjustment to the consideration transferred.
C. An identifiable asset that the acquirer recognizes separately from goodwill.
D. Not accounted for because no consideration is transferred for the reacquired
right.
15. If the terms of the contract giving rise to a reacquired right are favorable or
unfavorable relative to the terms of current market transactions for the same or
similar items, the acquirer shall recognize a (an)
A. Intangible asset if favorable
B. A liability if unfavorable
C. Either a or b
D. Neither a or b
16. A non-current asset (or disposal group) acquired in a business combination that is
classified as held for sale is measured at
A. Acquisition-date fair values
B. Previously carrying amounts
C. Fair value less cost to sell
D. Cost
17. Restructuring provision
A. Are generally not recognize as part of the business combination unless the
acquiree has at the acquisition date an existing liability for restructuring
that has been recognized in accordance with PAS 37.
B. That do not meet the definition of a liability at the acquisition date are
recognize as post combination expenses of the combined entity when the costs are
incurred.
C. Generally increases goodwill
D. A and B
18. A contingent liability assumed in a business combination
A. Is not accounted for by the acquirer if the contingent liability has an
improbable outflow of economic resources
B. Is recognized even if it has an improbable outflow of economic resources for as
long there is a present obligation and the fair value of the obligation can be
measured reliably
C. Is recognized only if there is present obligation, probable outflow of economic
resources, and can be measured reliably
D. A and C
19. For each business combination, the acquirer shall measure any non-controlling
interest in the acquiree at
A. At fair value
B. At the non-controlling interest’s proportionate share or the acquiree’s
identifiable net assets.
C. Either A or B
D. Neither A or B
20. How is goodwill or gain from bargain purchase computed?
A. The difference between the consideration transferred, including non-controlling
interest in the acquiree, and the acquisition date at fair value of net
identifiable assets acquired.
B. The difference between purchase price and the acquisition-date fair value of net
identifiable assets acquired.
C. The difference between the sum of (a) consideration transferred; (b) non-
controlling interest in the acquiree; and (c) acquisition-date fair value of the
acquirer’s previously held interest in the acquiree and the acquisition date
fair value of net identifiable assets acquired.
D. The excess of the acquisition-date fair value of net identifiable assets
acquired and their carrying amounts in the acquiree’s books.

Source: Advance Accounting - Zeus Vernon Millan