Beams11 ppt01
Beams11 ppt01
Beams11 ppt01
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,
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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 Bs 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
!
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Copyright 2012 Pearson Education,
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Inc. Publishing as Prentice Hall