Which of the Following Is Not True About Purchase Accounting

question 60

Multiple Choice

Which of the following is not true about purchase accounting?

• A) For financial reporting purposes, all M&As must be recorded using the purchase method of accounting.
• B) Under the purchase method of accounting, the excess of the purchase price over the target's net asset value is treated as goodwill on the combined firm's balance sheet.
• C) Goodwill may be amortized up to 40 years.
• D) If the fair value of the target's net assets later falls below its carrying value, the acquirer must record a loss equal to the difference.
• E) None of the above

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Definitions:

Illegal Reason

Refers to a motive or basis for action that is against the law or prohibited by legal statutes.

Sexual Harassment Claims

Legal allegations involving unwelcome sexual advances, requests for sexual favors, or other verbal or physical harassment of a sexual nature.

Title VII

A portion of the Civil Rights Act of 1964 that prohibits employment discrimination based on race, color, religion, sex, or national origin.

Disparate Impact

A theory in employment and legal disputes where policies, practices, or rules seemingly neutral result in a disproportionate impact on a protected group.