Brief Definition
Identifying the acquirer involves determining which entity is the buyer in a business combination. The acquirer is typically the entity that obtains control over the other entity.
Further Explanation
Identifying the acquirer involves determining which entity is the buyer in a business combination. This is crucial for accounting and financial reporting because the acquirer will consolidate the acquired entity’s assets, liabilities, and operations into its own financial statements. The acquirer is typically the entity that obtains control over the other entity. Control usually means having the power to direct the activities and policies of the other entity, often achieved through acquiring a majority of voting rights
Example:
Company A merges with Company B, and after the merger, Company A’s shareholders own 60% of the combined entity while Company B’s shareholders own 40%. Company A’s management takes control of the combined entity. In this case, Company A is identified as the acquirer.