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Accounting for Corporate Structure 1 Accounting Standards in Business Combination

   

Added on  2021-04-21

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Accounting for corporate structure 1ACCOUNTING FOR CORPORATE STRUCTUREBy (Student’s Name)Professor’s NameCollegeCourseDate
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Accounting for corporate structure 2ACCOUNTING FOR CORPORATE STRUCTUREIntroductionThis paper explains the accounting techniques and concepts as used inAustralian accounting standards in business combination. There are some significanttheory and definition which describes the requirements of the Australia accountingstandard. It also linked the Australian accounting standard with that of the IFRS andIASThe Australian reporting entity is importance since it discloses the resources,and the outcomes of their deployment, thus enable users to know the financialposition and the performance of the entity. The information will assist the users inmaking decisions on the resource allocation and is also essential for the assessment ofpast decisions. Information on all the resources that can be deployed by the entity areimportant, whatever administrative or the legal structure developed with the intentionof managing those resources (Cassar, Ittner and Cavalluzzo 2015). The Australianreporting entity is linked with the IFRS because follow the standards of reportingrequired by the IFRS.There are implications that are involved in using the acquisition techniques ofaccounting for the business combination. A business combination performed withoutthe exchange of consideration. An acquirer may get full control of acquiring withoutthe transfer of the consideration. The acquisition techniques of accounting will applythis type of business combination (Watts and Zuo 2016). The Australian method of determination of fair value of assets in a businesscombination follows the same rule stated in the IFRS. The accounting standard
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Accounting for corporate structure 3requires all the buyers in business amalgamation to determine the liabilities assumed,identifiable assets, as well as non-controlling interest at their acquisition fair value (Ji2017). Fair value is defined as the price that would be paid to transfer liability orearned to sell the asset in a well-ordered transaction between those that participates inthe market at the date of measurement. The Guidance in the estimation of the fair value which both the Australianaccounting standard share with the IFRS includes:Finish goods- Estimate selling price minus the sum of (a) a reasonableallowance on profit for selling effort received from the acquiring entity and (b) cost ofdisposal.Work in progress- estimated SP (selling price) of finished goods minus thesum of the cost of disposal, (b) cost to complete, and (c) reasonable allowance onprofit for selling and completing effort of the acquired entity based on the total profitfor the same similar finished goods.Raw materials: New replacement costsSpecific guidance on fair value assetsValuation allowance (Assets with unclear cash flow) - the date of theacquisition of fair value of assets for example loans and receivable should show theeffects of doubt about forthcoming cash flow. There should not be recognition of adistinct valuation allowance.Assets subjected to operating leases- the date of the acquisition of fair value ofacquired assets for example (patent and building) which are part of the operating leaseshould use the terms of the lease.The measurement principles of the fair value necessitate that the acquirershould measures liabilities assumed and assets acquired and any acquired non-
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