Asked by Kiran Neena on Jun 16, 2024
Verified
The disclosure rules pertaining to GAAP accounting for business combinations complicates financial analysis for which of the following reasons?
A) Comparative financial statements are not retroactively adjusted to include data for the acquired company for periods prior to the acquisition.
B) The inclusion of noncontrolling interest in the retroactively adjusted financial statements complicates the analysis.
C) The inclusion of acquired goodwill in the retroactively adjusted financial statements complicates the analysis.
D) The inclusion of the acquired firm's equity within the retroactively adjusted financial statements complicates the analysis.
GAAP Accounting
A set of accounting standards and practices known as Generally Accepted Accounting Principles, used primarily in the United States to ensure financial reporting consistency and transparency.
Business Combinations
Transactions in which one entity gains control over one or more other businesses, often through mergers or acquisitions.
Comparative Financial Statements
Financial statements that provide financial information for multiple periods side by side to facilitate comparison.
- Acquire knowledge on the accounting methods and fiscal consequences of purchase price distribution in corporate amalgamations, including the apportionment of surplus costs and the determination of goodwill.
Verified Answer
TH
Theresa HickmanJun 18, 2024
Final Answer :
A
Explanation :
Comparative financial statements under GAAP are not retroactively adjusted to include the financial data of the acquired company for periods before the acquisition. This can make year-over-year comparisons and trend analysis more challenging, as the post-acquisition financial statements will reflect the operations of both the acquiring and acquired companies, while pre-acquisition statements will not.
Learning Objectives
- Acquire knowledge on the accounting methods and fiscal consequences of purchase price distribution in corporate amalgamations, including the apportionment of surplus costs and the determination of goodwill.