AFM491 Chapter Notes - Chapter 6: Financial Statement, Transact, Contingent Liability
12 Oct 2020
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Inputs and processes: coordinated to provide a return, output. Fewer operating delays: avoidance of takeovers, grow and fulfill objectives, competitive position, diversify into a new market, access to new customers, products, expertise, capabilities. Control: power criterion, over intestee"s relevant activities, not protective rights, voting rights, make important decisions unilaterally, return criterion, exposure and rights to variable returns, enforceable, can not be prevented or limited, current right. Linkage: ability to use power to affect the returns. Forms of business combinations: purchasing net assets, purchasing shares, contractual arrangement. Buying assets of the company: costly transaction, can not have partial ownership, must buy 100% of the assets, assets must exist in an environment where they can combine together to conduct business activity. Journal entry to reflect purchase of assets: dr assets, cr cash, ap, etc, parent company"s balance sheet, acquiree liquidates, only one legal entity and one set of financial assets, transact with the actual company.
