In Lesson 1 of Module 2, we will discuss the overview of the acquisition method. Let's start with some basic terminology. Acquisition method is the method to account for a business combination. The acquisition date is the date on which the acquirer obtains control of the acquiree. The acquirer is the parent company, is the entity that obtains control of the acquiree. The acquiree–which will be called a subsidiary company– is the business that the acquirer obtains control of in a business combination. Fair value: Defined as the price that will be received to sell an asset or pay to transfer liability in the orderly transaction between market participants and the measurement date. A business combination is accounted for using the acquisition methods that requires to: Determine the acquisition date, to identify the accounting acquirer and the accounting acquiree, to recognize the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, and measure all of them at their acquisition date fair value. Also, acquisition method requires to recognize and measure goodwill, or gain from bargain purchase using the goodwill equation. The acquisition date is the date on which the acquirer obtains control of the acquiree generally is the date on which they acquirer legally transfers the consideration, acquires the assets, and assumes the liabilities of the acquiree. Basically, this is the closing, the effective date of the transaction. Identifiable assets acquired and liabilities assumed are measured based on their acquisition date fair value. However, some assets acquired and liabilities assumed should be measured based on their specific GAAP, and not based on their acquisition date fair value. For example, income taxes, employee benefits, share-based payment awards, and assets held for sale. The consideration transferred in a business combination must be measured also at its acquisition date fair value. The consideration transferred may include: the assets transferred by the acquirer, the liabilities incurred by the acquirer to the former owners of the acquiree, the equity interest issued by the acquirer. The consideration transferred may include: Cash, assets other than cash, shares of common stock of the acquirer, share options and share-based payment awards, and contingent consideration. However, regardless what consideration was transferred into business combination, whether it was cash, other assets, shares of common stock–regardless– it must be measured at its acquisition date fair value. Let's see these real-life business combination. In 2012, Express Scripts Company acquired Medco Company for approximately $30 billion. So, for example, in this real-life business combination, the consideration transferred to acquirer 100 percentage of Medco Company consisted of: Cash– approximately $11.3 billion– share issue to the Medco shareholders of approximately $18 billion, and stock option, issued approximately $700 million. In this course, we will discuss in depths the accounting for all the components of the consideration transferred in a business combination.