Which of the following statements is correct?
A) Under the new-entity method, both of the company's net assets are recorded at their fair market values for these assets on the date of acquisition.
B) Under the acquisition method, the acquirer company's net assets are revalued to fair value to reflect the substance of the transaction which, in essence is, a new company has been formed.
C) As of January 1st, 2011, the new-entity method must be used to account for business combinations where an acquirer can be identified.
D) The acquisition method is consistent with the historical cost principle while the New Entity Method is not.

Question

Quizplus · Accepted Answer

The new-entity method involves recording both companies' net assets at their fair market values on the date of acquisition, which is accurately described in option A.

Which of the Following Statements Is Correct