**Accounting for Business Combinations**

Accounting for business combinations involves the process of consolidating the financial statements of two or more companies following a merger or acquisition. Here's a brief overview:

1. **Definition:** A business combination occurs when one entity acquires control over another entity, either through a merger (where two entities combine to form a new entity) or an acquisition (where one entity buys a controlling interest in another entity).

2. **Acquisition Method:** The acquisition method is the primary accounting standard used to account for business combinations. Under this method, the acquiring company recognizes the assets acquired and liabilities assumed at their fair values at the acquisition date.

3. **Goodwill:** Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. Goodwill is recognized as an intangible asset on the acquirer's balance sheet and is subject to impairment testing annually or more frequently if indicators of impairment arise.

4. **Consolidated Financial Statements:** Following a business combination, the financial statements of the acquiring company and the acquired company are consolidated to reflect the combined financial position, results of operations, and cash flows of the newly combined entity.

5. **Disclosure Requirements:** Companies are required to provide extensive disclosures about business combinations in their financial statements. This includes information about the nature and terms of the combination, the fair values of assets acquired and liabilities assumed, and any contingent considerations or indemnification agreements.

**Objective Type Question:**

What represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination?

A) Equity B) Liabilities C) Goodwill D) Cash