Professional Documents
Culture Documents
Business
Combination
Chapter 1
Pertemuan 1
ukrida.ac.id
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Introduction
These standards
➢ Became effective for years beginning after December 15,
2008, and
➢ Are intended to improve the relevance, comparability and
transparency of financial information related to business
combinations, and to facilitate the convergence with
international standards.
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Nature of the Combination
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Nature of the Combination
Defense Tactics
1. Poison pill: Issuing stock rights to existing
shareholders.
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Nature of the Combination
Defense Tactics
4. Pac-man defense: Attempting an unfriendly takeover
of the would-be acquiring company.
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Nature of the Combination
Review Question
The defense tactic that involves purchasing shares held
by the would-be acquiring company at a price
substantially in excess of their fair value is called
a. poison pill.
b. pac-man defense.
c. greenmail.
d. white knight.
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Business Combinations: Why? Why Not?
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LO 2 Reasons firms combine.
Business Combinations: Historical Perspective
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LO 1 Describe historical trends in types of business combinations.
Business Combinations: Historical Perspective
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LO 1 Describe historical trends in types of business combinations.
Terminology and Types of Combinations
3. Stock
Common Stock 4. Combination of
of S Company above
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LO 5 Distinguish between an asset and a stock acquisition.
Terminology and Types of Combinations
Statutory Merger
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LO 5 Distinguish between an asset and a stock acquisition.
Terminology and Types of Combinations
Statutory Consolidation
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LO 5 Distinguish between an asset and a stock acquisition.
Terminology and Types of Combinations
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LO 5 Distinguish between an asset and a stock acquisition.
Terminology and Types of Combinations
Review Question
When a new corporation is formed to acquire two or
more other corporations and the acquired corporations
cease to exist as separate legal entities, the result is a
statutory
a. acquisition.
b. combination.
c. consolidation.
d. merger
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LO 5 Distinguish between an asset and a stock acquisition.
Takeover Premiums
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LO 5 Distinguish between an asset and a stock acquisition.
Avoiding the Pitfalls Before the Deal
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LO 3 Factors to be considered in due diligence.
Avoiding the Pitfalls Before the Deal
Review Question
When an acquiring company exercises due diligence in
attempting a business combination, it should:
a. be skeptical about accepting the target company’s
stated percentages
b. analyze the target company for assumed liabilities as
well as assets
c. look for nonrecurring items such as changes in
estimates
d. all the above
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LO 3 Factors to be considered in due diligence.
Determining Price and Method of Payment
in Business Combinations
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LO 6 Factors affecting price and method of payment.
Determining Price and Method of Payment
in Business Combinations
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LO 6 Factors affecting price and method of payment.
Determining Price and Method of Payment
Review Question
A potential offering price for a company is computed by
adding the estimated goodwill to the
a. book value of the company’s net assets.
b. book value of the company’s identifiable assets.
c. fair value of the company’s net assets.
d. fair value of the company’s identifiable net assets.
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LO 6 Factors affecting price and method of payment.
Determining Price and Method of Payment
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LO 7 Estimating goodwill.
Determining Price and Method of Payment
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LO 7 Estimating goodwill.
Determining Price and Method of Payment
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LO 7 Estimating goodwill.
Determining Price and Method of Payment
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LO 7 Estimating goodwill.
Determining Price and Method of Payment
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LO 7 Estimating goodwill.
Determining Price and Method of Payment
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LO 7 Estimating goodwill.
Determining Price and Method of Payment
Part B
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LO 7 Estimating goodwill.
Alternative Concepts of Consolidated
Financial Statements
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LO 8 Economic entity and parent company concepts.
Alternative Concepts
Review Question
According to the economic unit concept, the primary
purpose of consolidated financial statements is to
provide information that is relevant to
a. majority stockholders.
b. minority stockholders.
c. creditors.
d. both majority and minority stockholders.
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LO 8 Economic entity and parent company concepts.
Alternative Concepts
Intercompany Profit
Two alternative points of view:
2. Partial elimination
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LO 8 Economic entity and parent company concepts.
SFAC
Nos. 1 & 2
Conceptual Objectives:
Provide Information: Framework
1. Usefulness in
investment and credit decisions
Figure 1-2 2. Usefulness in future cash flows Objectives
Conceptual
3. About enterprise resources, claims
to resources, and changes
Framework for
Financial SFAC No. 2 SFAC No. 6
Accounting and Qualitative
Characteristics
(replaced SFAC No. 3) Fundamental
Reporting
Elements of Financial
1. Relevance Statements
2. Reliability Provides definitions
3. Comparability of key components
4. Consistency of financial statements
Also:Usefulness,Understandability
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LO 8 Economic entity and parent company concepts.
FASB’s Conceptual Framework
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LO 8 Economic entity and parent company concepts.
FASB’s Conceptual Framework
Overview of FASB’s Conceptual Framework
The Statements of Financial Accounting Concepts issued by
the FASB include:
SFAC No.1 - Objectives of Financial Reporting
SFAC No.2 - Qualitative Characteristics of Accounting Information
SFAC No.3 - Elements of Financial Statements (superceded by
SFAC No. 6)
SFAC No.4 - Nonbusiness Organizations
SFAC No.5 - Recognition and Measurement in Financial Statements
SFAC No.6 - Elements of Financial Statements (replaces SFAC No. 3)
SFAC No.7 - Using Cash Flow Information and Present Value in
Accounting Measurements
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LO 9 Statements of Financial Accounting Concepts.
FASB’s Conceptual Framework
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LO 9 Statements of Financial Accounting Concepts.
Thank You
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