Chapter 8. Business Combinations and Consolidated Financial Statements

Definitions of Terms



An entity pays cash, stock, and/or debt to acquire some portion of the voting stock of another entity, and the acquired entity continues to exist as a separate legal entity.


An entity gains control over the assets of another entity.


A new entity is formed to acquire other entities through an exchange of stock, after which the acquired entities are dissolved as separate legal entities.

controlling financial interest

Equity investors have voting rights to make decisions about an entity’s activities, must absorb the entity’s expected losses, and are entitled to the entity’s expected residual ...

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