Question

Company A released financial statements for year end 2021. The financial statements were consolidated financial statements, which combined results of their own business, with the results of Company B. Based on this information, what type of business combination occurred on the date these two companies combined ?

A) Statuatory Acquisition

B) Statuatory Consolidation

C) Statuatory Merger

D) Hostile Takeover

Answer 1

Sol:

Given The consolidated Financial statements show the combined results of Company A with that of Conpany B.

This means the financial position and the operating results of two companies are combined into one statement and shown in a single report called consolidated financial statement . It is impicitly understood that one or more companies join together to form a single entity, when their financial results are combined and shown in a single report.This happens in case of Statutory consolidation.

So option B is correct with refernce to above discussion

Option A is incorrect as Company A discloses results of Company B with its own financial results, which is contrary to acquisiton in which smaller company assets and liabilities form part of larger company

Option C is incorrect because in case of Statutory merger, the merged company loses its entity after merger. So here the merged company results are treated as the own results of merging company, but not in combined form.

Option D is incorrect as Hostile takeover is to replace the management so as to retain the status of acquisition