Business Definition case Essay

2289 Words Apr 20th, 2014 10 Pages
Definition of a Business
Fuzzy Dice, Inc. manufactures and distribute novelty items. Fuzzy is having a great demand on their products and are holding a large amount of cash on its balance sheet. In the same area are other manufacturing companies, among them Tiny Toys LLC, a children’s toy manufacturer. Tiny has been having financial troubles and recently filed for Chapter 11 bankruptcy protection. Fuzzy is interested in Tiny’s manufacturing facility, location and capabilities. Tiny’s manufacturing equipment is operational; they don’t have any goodwill, but have some intangible assets. Since, Fuzzy is holding so much cash they decided to buy Tiny’s and are in the final stages of the transaction. The Company is not certain
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Identifying a Business Combination
Classifying or Designating Identifiable Assets Acquired and Liabilities Assumed in a Business Combination
25-6 At the acquisition date, the acquirer shall classify or designate the identifiable assets acquired and liabilities assumed as necessary to subsequently apply other GAAP. The acquirer shall make those classifications or designations on the basis of the contractual terms, economic conditions, its operating or accounting policies, and other pertinent conditions as they exist at the acquisition date.

25-7 In some situations, GAAP provides for different accounting depending on how an entity classifies or designates a particular asset or liability. Examples of classifications or designations that the acquirer shall make on the basis of the pertinent conditions as they exist at the acquisition date include but are not limited to the following: a. Classification of particular investments in securities as trading, available for sale, or held to maturity in accordance with Section 320-10-25 
 b. Designation of a derivative instrument as a hedging instrument in accordance with paragraph 815-10-05-4 
 c. Assessment of whether an embedded derivative should be separated from the host

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