ACC 511 - Business Combinations

• Discuss the reason for business combinations and the journal entries used for acquisitions; the legal forms of business combinations; recording fair values in an acquisition for goodwill or a bargain purchase; and the Sarbanes-Oxley Act of 2002.
• Evaluate the fair value / cost and the equity method of accounting for investments; identify when a liquidating dividend occurs when using the cost method and how to properly record; demonstrate proper use of the one-line equity method which includes income and investment entries.
• Create consolidated balance sheets which includes the recording of the fair value of the subsidiary at the date of acquisition, the proper recognition of the fair value versus book value differential and noncontrolling interest, the amortization of the excess of the fair value over the book value in periods subsequent to the acquisition, and the preparation of eliminating and adjusting workpaper entries.
• Develop the consolidation workpaper for the year of acquisition and subsequent years when the parent uses the complete equity method to account for its investment in the subsidiary, which involves the use of the sequence of workpaper entries to enter appropriate adjustment and elimination entries.
• Analyze intercompany sales of inventory between parent and subsidiary, which includes elimination of sales, recognition of unrealized profit in beginning inventory, elimination of unrealized profit in ending inventory, and proper computation of upstream and downstream sale situations.
• Analyze intercompany sales of both non-depreciable and depreciable assets, which includes deferring unrealized profits on plant asset transfers while the asset remains intercompany and recognizing realized, previously-deferred profits when sold to an outside entity, also the piecemeal recognition of gains in upstream and downstream sale situations.
• Evaluate foreign currency denominated sales and purchase transactions including the use of forward contracts and options for fair value and cash flow hedges.
• Compare and contrast the use of the translation and remeasurement methods for consolidation of foreign subsidiaries.