In a 1976 Discussion Memorandum, the FASB Defined the New

question 38

Multiple Choice

In a 1976 discussion memorandum, the FASB defined the new entity approach to accounting for business combinations as a method which:

• A) Results in the assets and liabilities of the subsidiary being valued at market value at the time of acquisition, and the parent's assets and liabilities being valued at book value.
• B) Results in the assets and liabilities of the parent being valued at market value at the time of acquisition, and the subsidiary's assets and liabilities being valued at book value.
• C) Results in all entities' assets and liabilities being revalued to market values at the time the combination originates.
• D) Uses the book values of the combining companies.