Australian Requirement for Business Combinations
Abstract:
The issue of accounting for Business Combinations, according to Australian standards, has been a cause of considerable concerns and controversies for both, accountants and academics. However, due to the enormity of transactions involved in it, it becomes highly important to understand its application.
In this research, we will outline various concepts and definitions to business combinations and address some important issues such as reporting entity concept, determination of fair value of assets, nature and treatment of goodwill, fair value approach in determining the cost of business combinations. While doing this, we will keep in mind the major accounting practices applied for various issues related to Business Combinations in Australia.
Introduction:
‘Growth’ is the main objective of any business organization. Top management always triggers growth or expansion as their primary goal. A company may grow slowly, gradually expanding its product lines, facilities or services, or it may unexpectedly shoot up overnight. Some managers consider growth so important that they say “a company must either grow or die”. In past hundred years in US and Australia, many companies have achieved their goal of expansion through business combinations.
Such expansion can be of two types:
1) Internal expansion
2) External expansion
A firm can expand internally by expanding its research and development.
External expansion is when a business tries to expand by acquiring one or more other firms. This is also termed as Business Combination or Mergers or Acquisitions. This form of expansion is more popular over recent years, as it attracts rapid attention and growth. In a ...