CAF-6 · Chapter 12 · Question 3 of 15
An entity acquires an intangible asset (a patent) in a business combination. The acquiree had not recognized the patent in its own financial statements because it was internally generated. How should the acquirer treat this patent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Recognize it as an intangible asset at its fair value at the acquisition date.
Explanation
In a business combination, the acquirer recognizes the identifiable intangible assets of the acquiree at fair value, even if those assets (like an internally generated patent) were not recognized in the acquiree's separate financial statements.
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