If the Cost of a Business Combination Is Greater Than

question 13

Multiple Choice

If the cost of a business combination is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:

• A) a business combination gain on bargain purchase arises
• B) goodwill has been purchased and must be recognised
• C) the difference is treated as a special equity reserve in the acquirer's accounting records
• D) the difference is treated as a loss and immediately charged to profit or loss of the period in which the business combination occurred.

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Definitions:

Non-manufacturing Costs

Expenses not directly tied to the production process, such as selling, general, and administrative expenses.

Non-manufacturing Overhead

Expenses incurred by a company that are not directly related to the production process, such as administrative and marketing expenses.

Traditional Approach

A conventional method often based on long-established practices or techniques.

Service Business

A type of business that primarily offers intangible products, such as work, expertise, or services, instead of physical goods.