Describe the accounting concept of a business combination.
According to International Financial Reporting Standard-3 Business Combinations
"A business combination is a transaction or event in which an acquirer obtains control of one or more than one businesses. A business can be defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return directly to investors or other members, owners or participants"
Steps in Accounting for Business combinations
Acquisition Method: The acquisition method is used for all BCs..
How to apply acquisition method:
Is dissolution of all but one of the separate legal entities necessary in order to have a business combination?
The dissolution of all but one of the separate legal entities are not adequate for a BC. An example of business combination in which the separate legal entities are not dissolved is when one corporation becomes a subsidiary of another entity. In case of a parent-subsidiary relationship, each combining entity continues to exist as a separate legal entity even though both companies are under the control of a single management.