Question

In a business combination achieved in stages, ownership interest in the acquiree, obtained by the acquirer prior to achieving control, must be remeasured to fair value at the acquisition date.

a. True
b. False

Answer 1

In a business combination achieved in stages, ownership interest in the acquiree, obtained by the acquirer prior to achieving control, must be remeasured to fair value at the acquisition date.

Step-by-step explanation:

In a business combination achieved in stages, ownership interest in the acquiree, obtained by the acquirer prior to achieving control, must be remeasured to fair value at the acquisition date.

True

When an acquirer obtains ownership interest in the acquiree before achieving control, the ownership interest is remeasured to fair value at the acquisition date. This ensures that the financial statements reflect the fair value of the assets and liabilities of the acquiree at the time of acquisition. It is important to accurately measure the ownership interest to provide relevant and reliable information to users of financial statements.

For example, if Company A acquires a 20% ownership interest in Company B and later acquires additional ownership interest to achieve control, the 20% ownership interest would be remeasured to fair value at the acquisition date. This fair value may be different from the carrying value of the ownership interest on Company A's books.