Acquisition Method of Accounting for Acquisitions

Very Easy Intercorporate Investments Acquisition Method

When a company acquires another company, the acquisition method is used to account for the acquisition in the financial statements. Under this method, how should the acquiring company recognize the tangible and intangible assets acquired as well as any liabilities assumed?

Identify the correct statement regarding the acquisition method of accounting as prescribed by the applicable financial reporting standards.

The acquiring company should record the acquired assets and assumed liabilities at their historical cost.

The acquiring company should record the acquired assets and assumed liabilities at their fair value on the acquisition date.

The acquiring company should only record the acquired intangible assets at cost.

Hint

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