In What Situation Does an Excess on Acquisition Arise and How

question 30

Multiple Choice

In what situation does an excess on acquisition arise and how does AASB 3 require it to be treated?

• A) An excess arises when the fair value of the purchase consideration is greater than the nominal value of the assets purchased. AASB 3 requires an excess to be eliminated by recognising it as a gain in the period in which the entity was purchased.
• B) An excess arises when the fair value of the purchase consideration is greater than the nominal value of the assets purchased. AASB 3 requires the fair values of the monetary assets acquired to be proportionately decreased until the excess is eliminated. If an excess balance remains it must be recognised as an expense in the income statement.
• C) An excess arises when the cost of acquisition exceeds the fair value of the identifiable net assets purchased. AASB 3 requires the equity of the purchased entity to be proportionately decreased until the excess is eliminated.
• D) An excess arises when the fair value of the identifiable net assets acquired by the entity exceeds the fair value of the consideration paid. AASB 3 requires a reassessment of the identification and measurement of the identifiable net assets, and a reassessment of the measurement of the fair value of the consideration paid. If an excess remains after the reassessment it must be recognised as income in profit or loss.
• E) None of the given answers.

Explain the role of external factors such as natural disasters on markets.

Analyze the effect of competition on market operations and services.

Understand how supply and demand affect market equilibrium, prices, and quantities.

Analyze the impact of external shocks on market supply and demand.

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