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:

Verifiable Work

Tasks or projects that can be substantiated or confirmed, often relevant in contexts where proof of performance or achievement is required.

Deliverables

Refers to the tangible or intangible outcomes that a project or part of a project is expected to produce as an agreed-upon deliverable to a customer or project sponsor.

Scenario Planning

A strategic planning method used to create and analyze different future scenarios to aid decision-making under uncertainty.

Contingency Planning

The process of preparing for unexpected events by developing strategies to mitigate their potential impact on operations.