IFRS 3 outlines the accounting requirements for business combinations. Which of the following statements is correct?
A) Companies may choose between the new entity method and the acquisition method when accounting for business combinations.
B) The only acceptable method of accounting for business combinations is the new entity method.
C) The only acceptable method of accounting for business combinations is the acquisition method.
D) The new entity method can only be used when cash is the sole consideration offered by the acquirer in a business combination.

Question

Quizplus · Accepted Answer

According to IFRS 3, the only acceptable method of accounting for business combinations is the acquisition method. Companies cannot choose the new entity method, and this method cannot be used if cash is the sole consideration offered by the acquirer.

IFRS 3 Outlines the Accounting Requirements for Business Combinations