as a single identifiable asset in a business combination.

The entity also

concludes that the group of 10 single-family homes is a group of similar identifiable
assets because the assets (all single-family homes) are similar in nature and the risks
associated with manoffice, month-end allocation of previously recorded advertising expenses to
a branch
requires the following entry on the branch’s books to record the allocation:
Debit Credit
a. Advertising expense Accrued liabilities
b. Branch income Home Office capital
c. Advertising expense Branch income
d. Home Office capital Accrued liabilities
e. None of the above
D. The Shipments to Branch Ledger account in the accounting records of the home office of a
business enterprise:
a. Is an asset valuation account
b. Indicates that the home office uses the periodic inventory system
c. Is adjusted at the end of the accounting period to equal the unrealized profit in the branch’s
ending inventories
d. Is not displayed in the home office’s separate financial statements
C. The Western Branch of Rivas Company reported a net income of 60,000 for the month of
January. The appropriate journal entry (explanation omitted) for the home office of Rivas
Company is:
a. Income Summary 60,000
Income: Western Branch 60,000aging and creating outputs are not significantly different. This is
because the types of homes and classes of customers are not significantly different.
Consequently, substantially all of the fair value of the gross assets acquired is
concentrated in a group of similar identifiable assets. Therefore, the entity concludes
that the acquired set of activities and assets is not a business. [IFRS 3.IE75-76].
A second example assumes the same facts described above except that the entity also
purchases a multi-tenant corporate office park with six 10-storey office buildings that are
fully leased. The additional set of activities and assets acquired includes the land, buildings,
leases and contracts for outsourced cleaning and security. No employees, other assets, or
other activities are transferred. The aggregate fair value associated with the office park is
similar to the aggregate fair value associated with the 10 single-family homes. The processes
performed through the contracts for outsourced cleaning and security are ancillary or minor
within the context of all the processes required to create outputs. [IFRS 3.IE77].
After electing and applying the optional concentration test, the entity concludes that the
single-family homes and the office park are not similar identifiable assets because they
differ significantly in the risks associated