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Accounting for Business Combination HO No.3.pdf - THE IFRS...

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THE IFRS FOR SMALL AND MEDIUM-SIZED ENTITIES (SME)In the SEC Commission En Banc meeting dated December 3, 2009, it decided toadopt the Philippine Financial Reporting Standards for Small and Medium-sizedEntities (PFRS for SMEs).ThePFRS for SMEswere adopted by the PhilippineFinancial Reporting Standards Council (FRSC) from theIFRS for SMEsissued byInternational Accounting Standards Board (IASB).Who are qualified to apply PFRS for SMEs?
When is the effectivity date?
Section 19 of IFRS for SMEs – Business Combination and GoodwillScopeThis section is applicable to all business combinations, as defined in the standard.Furthermore, the section also addresses accounting for goodwill at the time of thebusiness combination and subsequently. This section specifically excludescombinations of entities or businesses under common control, the formation of jointventures and the acquisition of a group of assets that does not constitute a business.
DefinitionA business combination is the bringing together of separate entities or businessesinto one reporting entity. A business is an integrated set of activities and assetsconducted and managed for the purpose of providing a return to investors or lowercosts or other economic benefits directly and proportionately to policyholders orparticipants. Furthermore, a business generally consists of inputs, processes appliedto those inputs and resulting outputs that are or will be used to generate revenues.If goodwill is present in a transferred set of activities or assets, the transferred set ispresumed to be a business.Method of AccountingAll business combinations are accounted for using the “purchase method”. Thismethod involves identifying the acquirer, measuring the cost of the combination andallocating that cost to the assets acquired and liabilities and provisions for contingentliabilities assumed.

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Term
Fall
Professor
NoProfessor
Tags
Balance Sheet, Generally Accepted Accounting Principles, big company

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