1. Discuss the effect of a business combination on cash flow

Expert Solution

When one business gains control of a separate business it is known as a business combination. Business combinations are a way for a business to grow externally and expand their business by acquiring a larger share of the market they already operate in or by acquiring a company in a different business altogether to expand their footprint. This is frequently done when a company evaluates themselves and determines that it is either not feasible or not possibleto expand internally. When acquiring another company the two different companies must combine their financial statements. The financial statement is then prepared and recorded by the acquiring company and only the current reporting period is documented.
All business combinations are accounted for using the acquisition method of accounting. The acquirer must be identified as well as the acquisition date. All assets, liabilities, non-controlling interests and goodwill must be measured and recognized by the acquirer. Any acquisition fees will be recognized in the period for which they were incurred with the exception of the cost to issue debt

ekkarill92 answered 2 years ago

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