Goodwill Recorded by an Acquiree in a Business Combination Must

question 40

Multiple Choice

Goodwill recorded by an acquiree in a business combination must be:

• A) recognised at fair value on acquisition.
• B) recognised at carrying amount on acquisition.
• C) not recognised in the business combination.
• D) none of the above.

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Definitions:

Behavioral Economics

The branch of economic theory that combines insights from economics, psychology, and biology to make more accurate predictions about human behavior than conventional neoclassical economics, which is hampered by its core assumptions that people are fundamentally rational and almost entirely self-interested. Behavioral economics can explain framing effects, anchoring, mental accounting, the endowment effect, status quo bias, time inconsistency, and loss aversion.

Harmful Decisions

Choices made by individuals or entities that result in negative consequences or damage.

Neoclassical Economics

The dominant and conventional branch of economic theory that attempts to predict human behavior by building economic models based on simplifying assumptions about people’s motives and capabilities. These include that people are fundamentally rational; motivated almost entirely by self-interest; good at math; and unaffected by heuristics, time inconsistency, and self-control problems.

Rational Decision

Made when an individual, with clear set objectives, uses logic and all available information to choose the best possible outcome from various alternatives.