Assuming that both the acquiring and target firms have fiscal years ending on December 31,if the target is acquired on December 1,2015,which of the following is the most accurate?
A)Revenues of the target would be consolidated from 2016 onward.
B)Revenues of the target would be consolidated 100 percent for 2015.
C)Revenues of the target would be consolidated post-acquisition-that is,one month of revenues of the target for 2015.
D)No consolidation of revenues will happen.

Question

Quizplus · Accepted Answer

In a business combination, the acquiring company consolidates the financial statements of the target company from the date of acquisition. Therefore, if the target is acquired on December 1, 2015, the revenues of the target would be consolidated post-acquisition, which is one month of revenues of the target for 2015. Option A is incorrect since it implies that the consolidation would start from 2016, which is not accurate. Option B is incorrect since it suggests that the target's revenues would be consolidated for the entire year, which is not accurate. Option D is incorrect since there would be consolidation of revenues post-acquisition.

Assuming That Both the Acquiring and Target Firms Have Fiscal