In which circumstance will it be necessary to determine the fair value of an entity's own equity instruments?
A)Where the entity is preparing for an initial public offering of shares.
B)Where the entity undertakes a business combination and issues its own equity instruments in exchange for a business.
C)Where the entity undertakes a share buy-back.
D)Where the entity makes a right issue of shares to existing shareholders.

Question

Quizplus · Accepted Answer

When an entity undertakes a business combination and issues its own equity instruments in exchange for a business, it is necessary to determine the fair value of the equity instruments being exchanged. This is because the fair value of the equity instruments is needed for accounting purposes to correctly value the newly formed or combined entity.

In Which Circumstance Will It Be Necessary to Determine the Fair