;Advanced Financial Accounting Exam
With answers
Consolidated Financial Statements - answer-Portray the related companies as if
they were actually a single company.
Subsidiary - answer-Is a corporation that is controlled by another corporation
Parent Company - answer-The controlling company who usually owns through
majority ownership of its common stock
Special-Purpose Entity (SPE) - answer-A financing vehicle that is not a
substantive operating entity, usually one created for a single specified purpose.
Pooling-Of-Interests - answer-Previously widely used method of accounting for
business combinations, sometimes created earnings and, in the view of many,
provided misleading financial reporting subsequent to a combination.
Spin-Off - answer-Occurs when the ownership of a newly created or existing
subsidiary is distributed to the parent's stockholders without the stockholders
surrendering any of their stock in the parent company.
Split-Off - answer-Occurs when the subsidiary's shares are exchanged for shares
of the parent, thereby leading to a reduction in the outstanding shares of the
parent company
Business Combination - answer-Occurs when "...an acquirer obtains control of
one or more businesses."
Concept of Control - answer-Relates to the ability to direct policies and
management
Merger - answer-Business combination in which the acquired company's assets
and liabilities are combined with those of the acquiring company.
Controlling Ownership - answer-A business combination in which the acquired
company remains as a separate legal entity with a majority of its common stock
owned by the purchasing company leads to a parent-subsidiary relationship.
, Noncontrolling Ownership - answer-The purchase of a less-than-majority interest
in another corporation does not usually result in a business combination or
controlling situation.
Other Beneficial Interest - answer-One company may have a beneficial interest in
another entity even without a direct ownership interest.
Primary Beneficiary - answer-A company that has the ability to make decisions
significantly affecting the results of another entity's activities or is expected to
receive a majority of the other entity's profits and losses
Statutory Merger - answer-Is a type of business combination in which only one of
the combining companies survives and the other loses its separate identity.
Liquidated - answer-When the acquired company's assets and liabilities are
transferred to the acquiring company, and the acquired company is dissolved
Statutory Consolidation - answer-Is a business combination in which both
combining companies are dissolved and the assets and liabilities of both
companies are transferred to a newly created corporation.
Stock Acquisition - answer-Occurs when one company acquires the voting
shares of another company and the two companies continue to operate as
separate, but related, legal entities
Parent-Subsidiary Relationship - answer-The relationship that is created in a
stock acquisition
Hostile Takeover - answer-In an unfriendly combination, where the management
of the companies involved are unable to agree on the terms of a combination, and
the management of one of the companies makes a tender offer directly to the
shareholders of the other company.
Tender Offer - Answer-Invoties the shareholders of the other company to
exchange their shares for securities or assets of the acquiring company.
Noncontrolling Interest - answer-The total of the shares of an acquired company
not held by the controlling shareholder
With answers
Consolidated Financial Statements - answer-Portray the related companies as if
they were actually a single company.
Subsidiary - answer-Is a corporation that is controlled by another corporation
Parent Company - answer-The controlling company who usually owns through
majority ownership of its common stock
Special-Purpose Entity (SPE) - answer-A financing vehicle that is not a
substantive operating entity, usually one created for a single specified purpose.
Pooling-Of-Interests - answer-Previously widely used method of accounting for
business combinations, sometimes created earnings and, in the view of many,
provided misleading financial reporting subsequent to a combination.
Spin-Off - answer-Occurs when the ownership of a newly created or existing
subsidiary is distributed to the parent's stockholders without the stockholders
surrendering any of their stock in the parent company.
Split-Off - answer-Occurs when the subsidiary's shares are exchanged for shares
of the parent, thereby leading to a reduction in the outstanding shares of the
parent company
Business Combination - answer-Occurs when "...an acquirer obtains control of
one or more businesses."
Concept of Control - answer-Relates to the ability to direct policies and
management
Merger - answer-Business combination in which the acquired company's assets
and liabilities are combined with those of the acquiring company.
Controlling Ownership - answer-A business combination in which the acquired
company remains as a separate legal entity with a majority of its common stock
owned by the purchasing company leads to a parent-subsidiary relationship.
, Noncontrolling Ownership - answer-The purchase of a less-than-majority interest
in another corporation does not usually result in a business combination or
controlling situation.
Other Beneficial Interest - answer-One company may have a beneficial interest in
another entity even without a direct ownership interest.
Primary Beneficiary - answer-A company that has the ability to make decisions
significantly affecting the results of another entity's activities or is expected to
receive a majority of the other entity's profits and losses
Statutory Merger - answer-Is a type of business combination in which only one of
the combining companies survives and the other loses its separate identity.
Liquidated - answer-When the acquired company's assets and liabilities are
transferred to the acquiring company, and the acquired company is dissolved
Statutory Consolidation - answer-Is a business combination in which both
combining companies are dissolved and the assets and liabilities of both
companies are transferred to a newly created corporation.
Stock Acquisition - answer-Occurs when one company acquires the voting
shares of another company and the two companies continue to operate as
separate, but related, legal entities
Parent-Subsidiary Relationship - answer-The relationship that is created in a
stock acquisition
Hostile Takeover - answer-In an unfriendly combination, where the management
of the companies involved are unable to agree on the terms of a combination, and
the management of one of the companies makes a tender offer directly to the
shareholders of the other company.
Tender Offer - Answer-Invoties the shareholders of the other company to
exchange their shares for securities or assets of the acquiring company.
Noncontrolling Interest - answer-The total of the shares of an acquired company
not held by the controlling shareholder
