A Company Is About to Buy Another Company,but This Would

question 25

Multiple Choice

A company is about to buy another company,but this would result in "negative goodwill".For example,Company A pays £2m for Company S which has net assets of £3m.However,the fair value of the net assets of S is actually only £2.1m Which of the following is the correct treatment of this situation?

• A) Revalue the assets of S to reflect the "fair value" of them prior to purchase
• B) Show negative goodwill £1m on the consolidated Statement of Financial Position
• C) Show the loss on purchase £1m on the Income Statement of A
• D) Write off the loss of £1m in company A prior to purchase

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Definitions:

Management By Exception

A management strategy where managers intervene only when their employees' performance deviates significantly from standards, focusing on exceptions to normal work rules.

Laissez-faire Leadership

A leadership style characterized by minimal direct supervision, with leaders providing teams with a high degree of autonomy and trust to make decisions.

Transformational Leadership

A leadership style that inspires and motivates followers to achieve extraordinary outcomes by transforming their attitudes and behaviors.

Transactional Leadership

Transactional Leadership is a style focused on the exchange between leader and followers, where followers are rewarded for specific achievements or penalized for failures.