Sharp Company will acquire 90 percent of Moore Company in a business combination. The total consideration has been agreed upon. Tha nature of Sharp's payment has not been fully agreed upon. Therefore, it is possible that this business combination might be accounted as either a purchase or a pooling of interests. It is expected that on the date the business combination is to be consummated, the fair value will exceed the book value of Moore's assets minus liabilities. Sharp desires to prepare consolidated financial statements that will include the financial statements of Moore.
Required :
(1) would the method of accounting for the business combination (purchase vs pooling of interests) affect whether or not goodwill reported?
(2) if goodwill is reported, explain how the amount of goodwill is determined.
(3) would the method of accounting for the business combination (purchase vs pooling of interests) affect whether or not a noncontrolling interest is reported? If the amount reported differs, explain why.
(4) from a theoretical standpoint, why should consolidated financial statements be prepared?
(5) from a theoretical standpoint,what is the usual first necessary condition to be met before consolidated financial statements can be prepared?
(6) from a theoretical standpoint, does the method of accounting for a business combination ( purchase vs pooling of interests) affect.