sAcctgMerger(13p) - Theory of Mergers & Acquisitions:...

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Accounting Treatment Pooling versus Purchase
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Accounting Methods Pooling versus Purchase APB 16 (1970) The key difference is how assets come into the post-ma B/S Historical cost or Current value (often a ‘stepped-up’ basis)
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Pooling Common stock of the acquiring company must be used to capture 90% of the acquired company stock The C/S used for this must not be returned or repurchased (keep acquired s/h) Target company shareholders must retain an ownership position in the acquiring company. The two firms must be autonomous for 2 years before pooling Must be independent of other firms: < 10% minority interest in either firm. Single transaction
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Purchase Purchase recorded at FMV Capitalize costs of the acquisition Excess of price over book value: First, step up the basis of the assets to FMV Then, Goodwill is amortized over a ‘useful life’.
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Accounting Methods: B/S versus I/S If the assets are treated as purchased:
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This note was uploaded on 04/02/2009 for the course DEPARTMENT FIN 4320 taught by Professor Sherwoodbishop during the Spring '08 term at Southwestern.

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sAcctgMerger(13p) - Theory of Mergers &amp; Acquisitions:...

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