Pear Ltd and Mango Ltd have been in negotiations for several months for the two companies to combine. In considering the accounting for the combined entities, management realises that, in applying AASB 3, an acquirer must be identified. However, there is debate among the accounting staff as to which entity is the acquirer. Required:

1. What factors/indicators should management consider in determining which entity is the acquirer? (3 marks)
2. Why is it necessary to identify an acquirer? What differences in accounting would arise if Pear Ltd or Mango Ltd were identified as the acquirer? (2 marks)