ACCT602_MQ3 – IFRS 3 11.

It is a transaction or other event in which an acquirer obtains control of

one or more businesses. A
1. An acquirer shall at the acquisition date recognize goodwill acquired in the a. Business Combination
business combinations as an asset. Goodwill shall be accounted for as b. Consolidation
which of the following? D c. Merger
a. Recognize as an intangible asset and amortize over its useful life. d. Controlling interest
b. Write off against retained earnings.
c. Recognize as an intangible asset and impairment test when trigger event 12. Viva Co. paid a certain amount to Home Co. with the intention to control
occurs. the operations of the latter. In drafting the agreement, Viva was given the
d. Recognize as an intangible asset and annually test for impairment or more right to direct the relevant activities of Home Co. Because of such fact,
frequently if impairment is indicated. Viva’s returns from its involvement now have potential to vary as a result
of Home’s performance. Viva Co. has showed evidences that it can
2. The acquisition related cost in a business combination to be expensed actually affect its returns from Home Co. Which of the following
immediately include all of the following except: D statements is most correct? C
a. Professional and consulting fees a. Viva Co. obtained control over Home Co.
b. Cost of maintaining an acquisition department b. Viva Co. will be required to prepare consolidated FS
c. Finders’ fees c. Both A and B are correct.
d. Cost of issuing debt securities d. None of the statements is correct.

3. In a business combination, any gain on bargain purchase shall: A 13. Samsung is buying out Nokia in a recently signed business merger,
a. Be recognized in the profit or loss. effective December 31, 2012. Samsung and Nokia are still under a non-
b. Be recognized in retained earnings. cancellable lease contract, expiring on October 31, 2013 that requires the
c. Be recognized in the other comprehensive income. former to pay monthly lease payment of P100,000. During the
d. Not be recognized. combination, Samsung paid additional P600,000 to Nokia as settlement of
the contract. Which of the following statements is true following this
4. How shall the acquirer shall account for changes in the fair value of scenario? D
contingent consideration classified as equity that are not measurement a. A contingent consideration amounting to P400,000 shall be reported by
period adjustments? A Samsung as the company might still be required to make the payments.
a. Shall not be re-measured but instead recognized as part of equity. b. Right of use of asset and lease liability are both to be recognized by
b. Shall be re-measured at fair value with any gain or loss included in profit Samsung.
or loss. c. P1,000,000, representing total lease payment of the remaining 10 months
c. Shall be re-measured at fair value with any gain or loss included in the will be included as part of the combination.
retained earnings. d. Neither right of use of asset not lease liability is recognized by Samsung.
d. Shall be re-measured at fair value with any gain or loss included in the
other comprehensive income. 14. In a business combination achieved in stages, how shall the acquirer
account for its previously held equity interest in the acquire? C
5. The following statements relate to a contingent consideration in business a. The acquirer shall not remeasure the previously held equity interest
combination. Which statement is correct? A and any amount previously recognized becomes part of the
I. The acquirer shall recognize the acquisition date fair value of any contingent consideration.
consideration as part of the consideration transferred in a business b. The acquirer shall remeasure any previously held equity interest and
combination. recognize any gain loss, if any in profit or loss.
II. The acquirer shall not recognize the acquisition date fair value of any c. The acquirer shall remeasure any previously held equity interest and
contingent consideration as part of the consideration transferred in a recognize any gain loss, if any in profit or loss or other
business consideration. comprehensive income as appropriate.
a. I only c. Both I and II d. The acquirer shall remeasure any previously held equity interest and
b. II only d. Neither I nor II recognize any gain loss, if any in equity through retained earnings.

6. The consideration transferred in a business combination shall be 15. All of the following are exception to measurement principle of IFRS 3,
measured at: A except: C
a. Fair value a. Reacquired rights c. Contingent Liabilities
b. Fair value determined by the acquirer b. Share-based payment transactions d. Assets held for sale
c. Carrying amount
d. Transaction Value 16. All of the following are required disclosures in IFRS 3, except: A
a. The name and a description of the acquirer
7. It is the equity in the subsidiary not attributable directly to a parent: B b. The acquisition date
a. Controlling interest c. The percentage of voting equity interest acquired
b. Non-controlling interest d. The primary reason for business combination and a description of how the
c. Subsidiary interest acquirer obtained control of the acquiree.
d. Residual Interest
17. Under IFRS 3, how shall non-controlling interest be measured at
8. The following statement relate to an acquisition date of a business acquisition date? C
combination. Which statement is incorrect? I. Fair Value
a. The acquisition date is the date on which the acquirer obtains control over II. A proportionate share of the acquiree’s identifiable net assets.
the acquiree. D a. I only b. II only c. Either I or II d. neither I nor II
b. The acquisition date is normally the closing date, meaning the date on
which the acquirer legally transfers the consideration, acquires the assets 18. Which statement is incorrect concerning the acquirer? D
and assumes the liabilities of the acquiree. a. In a business combination effected by transferring of cash or other assets,
c. Where several dates are key to business combination, the date on which the acquirer is usually the entity that transfers the cash or other assets.
control passes is the acquisition date. b. In a business combination effected by exchanging equity interest, the
d. The acquisition date can never precede the closing date. acquirer is usually the entity that issues equity interest, except in the case
of reverse acquisition.
9. The following statements relate to recognition and measurement of a c. The acquirer is usually the combining entity whose relative size is
business combination. Which statement is correct? C significantly greater than that of the other combining entities.
I. As of acquisition date, the acquirer shall recognize, separate from the d. If a new entity is formed to issue equity interests to effect a business
goodwill, the identifiable assets acquired, liabilities assumed and any non- combination, the new entity formed is necessarily the acquirer.
controlling interest in the acquiree.
II. The acquirer shall measure the identifiable assets acquired and liabilities 19. An acquirer might obtain control of an acquiree in all of the following,
assumed at their acquisition date fair value. except: D
a. I only c. Both I and II a. By transferring cash, cash equivalents or other assets
b. II only d. Neither I nor II b. By issuing equity interests
c. By contract alone, even without consideration
10. The application of the acquisition method accounting for business d. By acquiring interest in a joint arrangement
combination requires all of the following, except:
a. Identifying the acquirer D 20. This is defined as an integral set of activities and assets that is capable of
b. Determining the acquisition date being conducted and managed for the purpose of providing a return
c. Recognizing and measuring the identifiable assets acquired, the liabilities directly to investors or other owners, members or participants. A
assumed and any non-controlling interest in the acquiree. a. Business
d. Not recognizing goodwill or gain form bargain purchase b. Transaction
c. Isolated event
d. Undertaking