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In a reverse acquisition (legal acquirer ABX is shell; accounting acquirer BX is larger operating entity), the consolidated FS post-reverse-acquisition shows:
ABoth sides at FV; new push-down accounting
BAssets of BX at HISTORICAL COST; equity structure of ABX (legal acquirer); goodwill or capital reserve from FV-ing the assets/liabilities of ABX (accounting acquiree)
CPure book consolidation; no FV adjustments
DAssets of ABX at FV; equity structure of BX
Answer & Solution
Correct answer: B. Assets of BX at HISTORICAL COST; equity structure of ABX (legal acquirer); goodwill or capital reserve from FV-ing the assets/liabilities of ABX (accounting acquiree)
Reverse acquisition: assets of the accounting acquirer (BX) carry at historical cost; equity structure reflects the legal acquirer (ABX); the accounting acquiree (ABX/AX in this case) is FV'd, generating goodwill = PC of BX-notional-shares − net FV assets of accounting acquiree.
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