presented the error should be corrected in the earliest affected period

Presented the error should be corrected in the

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presented, the error should be corrected in the earliest affected period presented by correcting any individual amounts on the financial statements. The nature of an error in previously issued financial statements and the effect of its correction on relevant balances should be disclosed. (Bisk: 12-1-5; CSO: 3.1.0; 90138) 39. (c) A bargain purchase is a business combination in which the fair value of the recognized identi-fiable net assets acquired exceeds the fair value of the acquirer’s interest in the acquiree plus the recog-nized amount of any noncontrolling interest in the acquiree. In such cases, the acquirer should reassess whether it has correctly identified all of the assets acquired and all of the liabilities assumed and should recognize any additional assets or liabilities that are noted in that review. The objective of the review is to ensure that the measurements appropriately reflect consideration of all available information as of the acquisition date. If the excess remains after reassessment, the acquirer will recognize the resulting gain in earnings on the acquisition date. (Bisk: 16-2-4; CSO: 3.3.0; 90139) 40. (d) Acquisition costs are those costs the acquirer incurs to effect a business combination, and include: finders’ fees; advisory, legal, accounting, valuation, and other professional or consulting fees; general administrative costs; and costs of registering and issuing debt and equity securities. Acquisition costs are expensed in the period in which the costs are incurred and the services are received. (Bisk: 16-2-2; CSO: 3.3.0; 90140) 41. (c) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar (not identical) assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in nonactive markets; interest rates and yield curves observable at commonly quoted intervals; implied vola-tilities; and credit spreads. Internally generated cash flow projections are not a valid Level 2 input. (Bisk: 1-2-4; CSO: 3.9.0; 90141) 42. (b) A call option represents the right, but not the obligation, to buy a set number of shares of stock at a predetermined ‘strike price’ before the option reaches its expiration date. A call option is pur-chased in hopes that the underlying stock price will rise in the future well above the strike price. Entities can use the Black-Scholes, binomial, or similar pricing models to value the options. These models take into account the following information as of the grant date: (1) the exercise price, (2) the expected life of the option, (3) the current price of the stock, (4) the expected volatility of the stock, (5) the expected divi-dends on the stock, and (6) the risk-free interest rate for the expected term of the option. In this case, limited information is provided, so the value of the options would be the difference between the current/ market price and the strike/exercise price: 100 * ($10 – $9) = $100.

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