What does business combination mean on the CPA exam?
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Business combination. A transaction in which one entity obtains control of a business. It triggers the acquisition method: identify the acquirer, fix the date, measure what was acquired, and put goodwill in the gap.
Defined against ASC 805-10-25-1.
Which CPA exam sections use business combination?
Business combination appears in 2 CPA exam sections: BAR, FAR.
Related terms
- acquisition-date fair value: What something was worth on the day control changed hands.
- goodwill: An asset representing the future economic benefits of acquired assets not separately identified, measured as consideration less identifiable net assets.
- asset acquisition: Buying a group of assets that does not amount to a business.
- information and communication: One of the five components of internal control: how an entity obtains the information it needs and gets it to the people who have to act on it.
- liabilities assumed: Obligations the acquirer takes on as part of a combination.
- cash equivalents: Short-term, highly liquid investments readily convertible to known amounts of cash and so near maturity that interest rate changes pose insignificant risk.