A Business Combination Involves the Joining Together of Assets and Liabilities

question 17

Multiple Choice

A business combination involves the joining together of assets and liabilities under the control of a specific entity. Therefore, the business combination occurs at the date:

• A)the net assets are under the control of the acquirer.
• B)the contract is signed.
• C)the consideration is paid.
• D)nominated in the contract.

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Definitions:

Divestiture

The sale of assets, operations, divisions, and/or segments of a business to a third party.

Spin-off

A type of corporate reorganization in which a company creates a new independent company through the sale or distribution of new shares of its existing business.

Vertical Integration

An approach where a business grows by integrating various stages of its supply chain, including instances where a producer owns both its supplier and distributor.

Economies of Scale

Cost advantages that enterprises obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale.