BusinessCombinationsPart2 - StockM&AExample...

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Stock M&A Example Verizon acquired Alltel on 1/9/2009. Verizon paid $5.925 billion in  exchange for all of Alltel’s stock. Alltel continues to exist as a  subsidiary of Verizon, and has its  own set of books.
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How should we report this txn? On Verizon’s books , Investment in Alltel $5.925 billion Cash $5.925 billion On Alltel’s books , Nothing!
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Consolidation - General  Intuition Acquirer purchases an interest in a business at the  business’s market value (fair exchange) What’s the business’s market value made up of? Its recorded assets and liabilities Measured at book value but are assumed purchased  at market value Its unrecorded assets and liabilities Also assumed purchased at market value
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FAS no. 141R treatment Use purchase accounting for full acquisition The acquirer obtains  control   of all  of the  acquiree’s net assets (assets and liabilities) Use fair value (according to FAS 157) to measure  all acquiree assets and liabilities (MVE = MVA –  MVL)
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Consideration Measure at fair value
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This note was uploaded on 02/16/2012 for the course ACCY 510 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.

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BusinessCombinationsPart2 - StockM&AExample...

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