M&A Accounting Advisory

Your Challenges

In recent years, accounting standards have undergone significant changes. Given the capital markets’ swiftness in punishing corporations for accounting failures, complying with the fast-changing accounting standards is much more than just a technical accounting issue. Accounting is critical to M&As in the following areas:

  • Window dressing or erroneous accounting may mask the true financial position and operating performance of the target, e.g. revenue recognition, pension liabilities, off-balance sheet financial instruments and deferral of costs/losses
  • Complex deal structures may give rise to challenging accounting issues, e.g. contingent purchase consideration, consolidation, equity accounting, push-down accounting and predecessor accounting
  • Purchase price allocation may result in the target reporting significantly different postacquisition results which needs to be managed early
  • Targets in cross-border acquisitions may prepare their financials under different GAAP and need to convert their financials to the acquirer’s GAAP post-acquisition for consolidation or equity accounting purposes, which may also result in substantially different financial picture of the target
The company’s independent auditors can no longer advise on many of these without violating auditors’ independence rules. Companies will need assistance to supplement their internal resources and provide the depth of experience necessary to address M&A-related
accounting issues.

Meeting Your Needs

PwC’s Accounting Advisory Group is a global network of specialists dedicated to helping companies address complex M&A accounting issues under US GAAP, IFRS and Singapore Financial Reporting Standards (SFRS). Our principal service offerings include:

Accounting and Financial Reporting Advice
PwC can assist management to identify and understand the implications of the accounting issues relating to a deal and help prepare explanations to stakeholders. Some of our recent advisory work in complex accounting areas include:
  • Business combinations
  • Financial instruments
  • Tax effect accounting
  • Share-based payments
  • Revenue recognition
GAAP Conversion & Reconciliation
PwC has a proven track record in helping companies successfully complete the transition to new accounting standards. In an M&A environment, this is critical where the acquirer and target report under different GAAP frameworks. Our conversion specialists bring technical, training, communications and change management expertise to the project. With our proven Component Evaluations sm methodology/conversion tool, PwC can help to:
  • Identify potential GAAP differences between the target’s existing accounting policies and US GAAP/IFRS/SFRS
  • Quantify the differences identified
  • Advise on the form and presentation of the financial statements
  • Train and embed the conversion methodology in your accounting department to ensure sustainability
Carve-Out, Spin-Offs and Other Deal Structuring Advice
PwC’s carve-out, spin-offs and other structuring related advisory services help build confidence in an organisation’s ability to execute the deal, and free management to focus on the transaction’s value drivers. Drawing on a wealth of knowledge and practical experience, we can coordinate and deliver services such as:
  • Advice on accounting issues relating to carve-out/spin-offs
  • Preparation of carve-out/spin-offs financial statements
  • Advice on deal structuring
GAAP Training
To ensure a smooth post-merger integration in the accounting function, and to improve the quality and knowledge of accounting personnel, PwC provides:
  • Tailored US GAAP, IFRS and SFRS training
  • Regular updates on changes to US GAAP, IFRS and SFRS to the company
  • Assistance in impact assessment which helps companies in planning ahead for changes in US GAAP, IFRS and SFRS before and as they happen

Our Experience

Leading Hospitality Organisation
- Carve-Out of Business

PwC was engaged by a leading hospitality organisation to advise on the carve-out of am specific business segment.

Capitalising on our in-depth knowledge of GAAP, we successfully assisted management in structuring the carve-out transaction by identifying and analysing the complex accounting implications that may potentially arise. We provided valuable accounting advice on key areas such as group structure, revenue recognition and consolidation issues. With our assistance, an optimal business model was conceptualised.

We worked closely with management as well as the organisation’s lawyers. Our involvement provided management with more free time to focus on the transaction’s value drivers and the execution of the transaction.