HAC Healthcare Mergers & Acquisitions Accounting 2

Question 1

Under ASC 805, how should contingent consideration (earn-outs) be classified at the acquisition date in a healthcare M&A transaction?

Accepted Answer

Measured at fair value and recorded as part of the purchase price

Answer

ASC 805 requires contingent consideration to be measured at fair value on the acquisition date and included in the total purchase price consideration.

Question 2

A hospital acquires a physician group and assigns $4 million to a non-compete agreement. Under ASC 805, how is this intangible amortized?

Accepted Answer

Over its estimated useful life using the straight-line method

Answer

Finite-lived intangible assets such as non-compete agreements are amortized on a straight-line basis over their estimated useful lives.

Question 3

Which of the following best describes the 'measurement period' in a healthcare acquisition under ASC 805?

Accepted Answer

Up to one year after the acquisition date to finalize provisional purchase price allocations

Answer

The measurement period allows the acquirer up to 12 months post-acquisition to obtain information needed to finalize the purchase price allocation.

Question 4

In a healthcare merger, the acquirer identifies a Certificate of Need (CON) as an acquired intangible asset. How should it be classified?

Accepted Answer

As a finite-lived intangible if the CON has an expiration date

Answer

A CON with an expiration or renewal date is classified as a finite-lived intangible and amortized over its remaining useful life.

Question 5

When a healthcare organization acquires a rival clinic and the fair value of net assets exceeds the purchase price, the result is:

Accepted Answer

A bargain purchase gain recorded in earnings

Answer

When fair value of net identifiable assets exceeds purchase price, ASC 805 requires recognition of a bargain purchase gain in the income statement.

(HAC) Healthcare Accounting Certification Practice Test

(HAC) Healthcare Accounting Certification Practice Test

HAC Healthcare Mergers & Acquisitions Accounting 2