Question
XYZ, Inc. acquires 90% of Abbott Company in a business combination. The total consideration is agreed upon, but the exact nature of XYZs payment is
XYZ, Inc. acquires 90% of Abbott Company in a business combination. The total consideration is agreed upon, but the exact nature of XYZs payment is not yet fully specified. This business combination is accounted for as a purchase. It is expected that at the date of the business combination, the fair value will exceed the book value of Abbott's assets minus liabilities. XYZ desires to prepare consolidated financial statements that include the financial statements of Abbott.
Explain how the method of accounting for a business combination affects whether goodwill is reported. If goodwill is recorded, explain how to determine the amount of goodwill.
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