Beams, Anthony, Bettinghaus, Smith

Chapter 1: Business Combination

Learning Objectives :
1.
2.
3.

4.

Understand the economic motivations underlying

business combinations.
Learn about alternative forms of business combinations,
from both the legal & accounting perspectives.
Introduce accounting concepts for business
combinations, emphasizing the acquisition method.
See how firms record fair values of assets & liabilities in
an acquisition.

 Firms

produce economic value added for

shareholders.
expansion has long been regarded as a proper goal of
business entities. A business may choose to
expand either internally (building its own facilities) or
externally (acquiring control of other firms
in business combinations). The focus in this chapter
will be on why firms often prefer external over
internal expansion options and how financial
reporting reflects the outcome of these activities.