Step 1 Determine if transaction is a business combination Business combination

Step 1 determine if transaction is a business

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Recognize and measure goodwill or a gain from the bargain purchase. Step 1: Determine if transaction is a business combination: Business combination = a transaction or other event in which an acquirer obtains control of one or more businesses. Business = 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 economic benefits directly to investors or other owners, members or participants. So what you see; integrated set of activities; it’s the activities that provide a return. Needs to be a system of inputs that are transformed to outputs by processes. Hotel example = is buying the buildings and location is that a business combination? Distinguish whether we would buy PPE only, or also the activities. We need to determine whether there is process going on and whether there is output. If there is a business, there is a business combination. For this hotel to be a business; shouldn’t be just the building and PPE, but also managed team of employees and all the things need to be up and running. Only buying the inputs (=PPE) it isn’t a business, so no business combination. ~Add slides “What is a business?”-figure Step 3: Determine the acquisition date .
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