Acquisition Accounting under IFRS

Very Hard Intercorporate Investments Acquisition Method

ABC Corporation recently acquired XYZ Limited for $15 million. At the acquisition date, XYZ Limited's fair value was assessed at $12 million, with identifiable net assets accounting for $10 million and liabilities at $2 million. The acquisition provided a goodwill value of $3 million.

Considering the acquisition method of accounting under IFRS standards, which of the following statements correctly reflects the financial implications of this acquisition in ABC Corporation's financial statements?

The identifiable net assets of XYZ Limited will be recorded at their fair value on ABC Corporation's balance sheet, and a goodwill of $3 million will be recognized.

ABC Corporation will recognize a gain of $3 million due to the difference between the purchase price and the fair net asset value of XYZ Limited.

The assets of XYZ Limited will continue to be recorded at their book value prior to acquisition, with no adjustments for fair value or goodwill.

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