Accounting for Business Combinations

Question 1
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Both a business and an asset or a group of assets possess one or more inputs.

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True
False

Question 2
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A business is an integrated set of activities and assets that is capable of being conducted
and managed for the purpose of providing a return in the form of dividends, lower costs, or
other economic benefits directly to investors or other owners, members, or participants.

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True
False

Question 3
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The following are the elements of a business combination, EXCEPT

Select one:

a.
Process
b.
Activities

c.
Output

d.
Input

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Question 4
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A operational processes is for?

Select one:

a.
For obtaining contracts or customers, or developing, fulfilling, or producing outputs.

b.
For setting the overall strategy and direction of operations.

c.
For obtaining inventory and managing operational employees.

d.
None of the choices

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Question 5
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The acquirer usually is the combining entity whose single owner or organized group of
owners holds the largest minority voting interest in the combined entity.

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True
False

Question 6
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The acquirer usually is the combining entity that pays a premium over the pre-combination
fair value of the equity interests of the other combining entity or entities.

Select one:

a.
None of the Choices
b.
Composition of the Governing Body of the Combined Entity

c.
Composition of the Senior Management of the Combined Entity

d.
Terms of the Exchange of Equity Interests

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Question 7
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Determining the acquisition date is important because on this date, the acquirer begins
consolidating the acquiree, if required.

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True
False

Question 8
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Inputs that employees who form an organized workforce could develop (or are developing)
or convert into outputs could include the following: EXCEPT

Select one:

a.
Resources that could be developed to create outputs

b.
Access to necessary materials or rights that enable the creation of future outputs

c.
Intellectual property that could be used to develop a good or service

d.
Employees that form an organized workforce
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Question 9
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In some cases, a newco may be identified as the acquirer if the newco has combination
activities that are significant enough that the newco is determined to be substantive and
thus capable of being an acquirer.

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True
False

Question 10
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The result of inputs and processes applied to those inputs that provide goods or services to
customers, investment income (such as dividends or interest), or other revenues.

Select one:

a.
Process

b.
Output

c.
Activities

d.
Input
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Question 11
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Any economic resource that creates, or has the ability to contribute to the creation of,
outputs when one or more processes are applied to it.

Select one:

a.
Input

b.
Activities

c.
Process

d.
Output
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Question 12
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In a business combination effected primarily by exchanging equity interests, the acquirer
usually is the entity that issues its equity interests.

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True
False

Question 13
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For each business combination, one of the combining entities shall be identified as the
acquirer.

Select one:
True
 False

Question 14
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A strategic management processes is for?

Select one:

a.
None of the choices

b.
For obtaining contracts or customers, or developing, fulfilling, or producing outputs.

c.
For setting the overall strategy and direction of operations.

d.
For obtaining inventory and managing operational employees.

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Question 15
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Entities should consider the substance of the contract, including the nature of the activities
performed by the outsourced workforce.

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True
False

Question 16
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Any system, standard, protocol, convention, or rule that when applied to an input or inputs,
creates or has the ability to contribute to the creation of outputs. Examples include strategic
management processes, operational processes, and resource management processes.

Select one:

a.
Input

b.
Activities

c.
Process

d.
Output
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Question 17
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A business combination may be effected by forming a new legal entity (commonly called a
“newco”) to issue shares to the combining entities’ shareholders.

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True
False

Question 18
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If the initial composition of the governing body is subject to change shortly after the
business combination, entities should also consider how that composition might change.

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True
False

Question 19
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The entity identified as the acquirer for accounting purposes usually is the entity that issues
its equity interests to affect the transaction.

Select one:
True
False
Question 20
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When evaluating relative voting rights in the combined entity after a business combination,
entities should consider the following: EXCEPT

Select one:

a.
Options, warrants, and convertible securities.

b.
The volatility of the underlying shares.

c.
All securities with voting rights — not just voting common shares.

d.
Any unusual or special voting arrangements.

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