For Acquisition Accounting, Why Are Assets and Liabilities of the Subsidiary

question 111

Essay

For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?

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Definitions:

Short-Term Assets

Assets expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.

Aggressive Working Capital Policy

A strategy emphasizing minimal cash and inventory levels and maximizing short-term liabilities to fund operations and investments.

Permanent Working Capital

Permanent Working Capital is the minimum amount of capital that a company needs to operate effectively and continuously over the long term.

Financing Current Assets

The process of obtaining funds to cover short-term operational needs such as inventory, accounts receivable, and day-to-day expenses.