Which of the following is NOT a complete effect of an acquisition?

• A. Creation of goodwill and other intangibles
• B. Reduced revenue projections
• C. Additional shares outstanding
• D. Combined financial statements

Answer: (B)

The answer highlights that reduced revenue projections do not constitute a complete effect of an acquisition. When a company undergoes an acquisition, various tangible and intangible impacts are initiated, which can significantly influence its financial standing and market perception.

Goodwill and other intangibles are created as a direct result of an acquisition because they reflect the premium paid over the fair value of net identifiable assets acquired. This accounting treatment captures the value of brand, customer relations, and other non-physical assets, demonstrating one of the tangible outcomes of an acquisition.

The additional shares outstanding is also a result of the acquisition, particularly if the acquiring company issues new shares to finance the deal. This action changes the capital structure of the company and represents how an acquisition can alter shareholder equity.

Combined financial statements showcase the financial results of the acquiring company and the acquired company as a singular entity post-acquisition. This consolidation is a crucial outcome that reflects the synergistic benefits anticipated from the deal.

In contrast, reduced revenue projections may arise due to various factors assessed during the acquisition process, such as integration challenges or market conditions. However, they are not directly an effect of the acquisition itself but rather a potential consequence or concern that might be assessed pre- and post-acquisition. Thus, this is why