Professional Documents
Culture Documents
Business
Combinations
to accompany
Advanced Accounting, 11th edition
by Beams, Anthony, Bettinghaus, and Smith
1: ECONOMIC MOTIVATIONS
❖ Cost advantage
❖ Lower risk
❖ Fewer operating delays
❖ Avoidance of takeovers
❖ Acquisition of intangible assets
❖ Other: business and other tax advantages,
personal reasons
Antitrust
❖ Federal Trade Commission prohibited Staples’
acquisition of Office Depot
Regulation
❖ Federal Reserve Board
❖ Department of Transportation
❖ Department of Energy
❖ Federal Communications Commission
2: FORMS OF BUSINESS
COMBINATIONS
Merger
❖ Occurs when one corporation takes over all the
operations of another business entity and that
other entity is dissolved.
Consolidation
❖ Occurs when a new corporation is formed to take
over the assets and operations of two or more
separate business entities and dissolves the
previously separate entities.
Copyright ©2012 Pearson Education,
1-8
Inc. Publishing as Prentice Hall
Mergers:
A+B=A X+Y=X
Company A acquires the net assets of
Company B for cash, other assets, or
Company A debt/equity securities. Company
B is dissolved; Company A survives with
Company B’s assets and liabilities.
3: ACCOUNTING FOR
BUSINESS COMBINATIONS
Identify:
❖ Tangible assets acquired,
❖ Intangible assets acquired, and
❖ Liabilities assumed
Include:
❖ Identifiable intangibles resulting from legal or
contractual rights, or separable from the entity
❖ Research and development in process
❖ Contractual contingencies
❖ Some noncontractual contingencies
Copyright ©2012 Pearson Education,
1-22
Inc. Publishing as Prentice Hall
Assign Fair Values to Net Assets
5: OTHER ISSUES:
IMPAIRMENTS,
DISCLOSURES, AND THE
SARBANES-OXLEY ACT