IFRS 3/AASB 3 Requires That, If the Amount Paid for a Business

question 43

Multiple Choice

IFRS 3/AASB 3 requires that, if the amount paid for a business is less than the sum of the fair value of the net identifiable assets acquired, and this is a genuine bargain purchase, then the difference is to be:

• A) taken directly to an equity account.
• B) offset against any goodwill previously acquired.
• C) used to reduce the value of the monetary assets acquired.
• D) recognised immediately as a gain in the income statement.

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Definitions:

Profit Center

A business segment or department within an organization that is responsible for generating its own revenue and thereby directly impacting profitability.

Responsibility Center

A department or unit within an organization that is accountable for specific activities and performance, with its performance measured against planned objectives.

Generates Revenues

Refers to the activities or mechanisms through which a business or organization brings in income.

Traceable Fixed Cost

A fixed cost that can be directly associated with a specific cost object, such as a product, department, or project.