Business combinations

The accounting for business combinations, divestitures, and related topics such as impairments and segment reporting continues to pose many challenges and remains on the SEC's radar screen.

Accounting for Goodwill - Latest developments

Following the issuance of Accounting Standards Update No. 2014-02, Accounting for Goodwill, which significantly changes the way that private companies can account for goodwill, the FASB has undertaken a project to consider changes to the accounting for goodwill after a business combination, including potential simplification of the goodwill impairment test for public and not-for-profit entities. The board is considering several potential alternatives, but during its March meeting, indicated a preliminary leaning toward permitting entities to apply a single-step impairment test, and possibly allowing that assessment to be done at a level higher than a reporting unit. The board is awaiting the results of the IASB’s post-implementation review of its business combinations standard to see whether there may be an opportunity to improve convergence before arriving at any conclusions. Further discussions are not expected until the third quarter of 2014.

Reporting Discontinued Operations - Latest developments

In April 2014, the FASB issued a new standard changing the threshold for reporting discontinued operations and adding new disclosures for disposals. The new guidance defines a discontinued operation as a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. A strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the FASB provides examples of when a disposal qualifies as a discontinued operation.

Having significant continuing involvement with a component after a disposal or failing to eliminate the operations or cash flows of a disposed component from an entity’s ongoing operations will no longer preclude presentation as a discontinued operation. New disclosure and presentation requirements apply to discontinued operations and to disposals of individually significant components that do not qualify as discontinued operations. The guidance applies prospectively to new disposals of components and new classifications as held for sale beginning in 2015 for most entities, with early adoption allowed. PwC’s Dataline summarizes the main provisions, provides insights into key aspects of the standard, and highlights areas to consider when applying the new guidance.

Pushdown Accounting - Latest developments

At its March meeting, the Emerging Issues Task Force (EITF) reached a consensus-for-exposure on Issue 12-F that all entities would have the option to apply pushdown accounting upon a change-in-control. This would result in a significant change in practice. Currently, pushdown accounting is prohibited for public entities unless a purchase transaction results in obtaining an ownership interest of at least 80%, and it is required at an ownership interest of 95% or more.

There would be no additional requirements to apply pushdown accounting and no circumstances that would preclude an entity from applying pushdown accounting upon a change-in-control. The guidance would be applied prospectively to all change-in-control events occurring after the effective date. The effective date will be discussed after input from comment letter respondents is received. Look to PwC’s EITF observer – March 2014 for details.

Two standards that were issued last year became effective for some companies beginning in January 2014:

  • Accounting Standards Update No. 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. Refer to PwC’s Dataline 2013-10 for details.
  • Accounting Standards Update No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. Refer to PwC’s In brief 2013-22 for details.

Continued areas of focus in Business Combinations

Among the continuing areas of challenge for preparers and users is the application of guidance for:

  • Determining if a transaction should be accounted for as an asset acquisition or a business combination;
  • Accounting and valuation of contingent consideration;
  • Accounting for changes in ownership interests and noncontrolling interests;
  • Segment reporting, and
  • Impairments of goodwill and long-lived tangible and intangible assets.

In addition to being complex, applying the relevant accounting guidance often involves significant judgments and estimates to be determined by both financial and non-financial management. PwC has a publication series entitled “Mergers & acquisitions - a snapshot” that takes these complex topics and addresses them in a plain-English manner. PwC has issued numerous publications from this series which are available, along with other helpful technical alerts, in the “Publications” section of this website. PwC recently commenced a series focused on navigating the waters of a cross-border acquisition. The series will look at various aspects along the deal continuum, including pre-acquisition due diligence and strategies, financial reporting requirements, tax implications, and post-acquisition considerations.

 

Accounting guide

Business combinations and noncontrolling interests - 2014 global accounting and financial reporting guide

9/16/14 | Assurance services

This PwC guide explains the principles of accounting and financial reporting for business combinations and noncontrolling interests (ASC 805) under both U.S. GAAP and IFRS. This guide includes our perspectives on the application of those principles, and our insights on the challenges of accounting for intangible assets and goodwill in the post-combination period. Read more

In the loop

Selling part of your business? New rules for reporting disposals

9/22/14 | Assurance services

In the loop

Spin-off transactions - creating a new public entity

9/3/14 | Assurance services
  • Corporate Governance Series
    The Quarter close: Directors edition Q3 2014

    9/24/14 | Center for Board Governance

    This quarterly publication is designed to keep directors informed about the latest accounting and financial reporting issues.

  • In the loop
    In the loop: Selling part of your business? New rules for reporting disposals

    9/22/14 | Assurance services

    Fewer disposals are expected to be reported as "discontinued operations" under new guidance.

  • Private company reporter
    Private company reporter - PCC votes to simplify the accounting for certain intangible assets

    9/22/14 | Assurance services

    Under the alternative, private companies will not have to separately recognize and measure certain intangible assets.

  • Retail & Consumer Knowledge Brief: Technical and Quality Newsletter (September 2014)

    9/18/14 | Retail & consumer

    What are the technical and reporting issues impacting retail and consumer products companies? PwC's Retail & Consumer KnowledgeBrief provides insights and summaries on two standards recently issued by the FASB, considerations and insights on the SEC’s continued focus on segment reporting, and more.

  • Accounting guides
    Business combinations and noncontrolling interests - 2014 global accounting and financial reporting guide

    9/16/14 | Assurance services

    This PwC guide explains the principles of accounting and financial reporting for business combinations and noncontrolling interests (ASC 805) under both U.S. GAAP and IFRS. This guide includes our perspectives on the application of those principles, and our insights on the challenges of accounting for intangible assets and goodwill in the post-combination period.

  • Quarter close
    The quarter close — Third quarter 2014: Publication and new video perspectives

    9/15/14 | Assurance services

    This edition updates you on recent FASB, SEC and other regulatory and corporate governance topics. Learn what's new now, and what to look for in the near future. We invite you to download our Q3 publication and view our new video perspectives.

  • Video
    Spin-offs

    9/8/14 | Assurance services

    Spin-off transactions are increasing in the marketplace. Is there one in your future? PwC's Neil Dhar, Ravi Rao and Beth Paul discuss the current market trends, key considerations for carve-out financial statements, and how to be successful both during and after a spin-off.

  • In the loop
    In the loop: Spin-off transactions - creating a new public entity

    9/3/14 | Assurance services

    Spin-offs represent a growing trend in recent years. Is there one in your future? Gain insight into the spin-off process including developing carve-out financial statements and creating a sustainable stand-alone entity.

  • Webcast
    Corporate divestitures webcast - September 15, 2014

    Assurance services

    Join us for part 3 of PwC’s National Professional Services Group’s Accessing the capital markets series featuring Beth Paul, U.S. Strategic Thought Leader, Ravi Rao, National Office SEC Services Partner, and Neil Dhar, National Capital Markets Leader. The panel will focus on carve-out transactions and will discuss trends in the divestiture market as well as how to manage the divestiture process. The panel will also outline key issues and accounting considerations, explore SEC reporting requirements, and provide key takeaways for participants.

  • Private company reporter
    Private company reporter - PCC makes progress on intangible assets

    7/22/14 | Assurance services

    The Private Company Council (PCC) continues to make progress on simplifying accounting for intangible assets acquired in a business combination.

  • Practical tip
    Practical tip: Presenting less than 12 month financial statements of an acquired business (No. 2014-04)

    7/15/14 | Assurance services

    This Practical tip provides guidance regarding using less than 12 month financial statements in lieu of a full year for an acquired business.

  • Corporate Governance Series
    The Quarter close: Directors edition Q2 2014

    6/26/14 | Center for Board Governance

    The Q2 2014 edition focuses on five IPO reminders for boards, FASB's new guidance on discontinued operations, and the Venezuelan exchange rates.

  • Video
    Discontinued operations

    6/17/14 | Assurance services

    PwC's Sara DeSmith, Matthew Brenner, and Stephanie Stewart discuss recently issued accounting guidance related to discontinued operations.

  • M&A snapshot
    Cross-border acquisitions - Post-acquisition considerations (M&A snapshot)

    6/9/14 | Assurance services

    In cross-border deals, buyers shouldn't underestimate aspects of a transaction that require attention post-acquisition.

  • Practical tip
    Practical tip: Parent company financial information when the registrant has a consolidated shareholders’deficit (No. 2014-03)

    6/4/14 | Assurance services

    This Practical tip provides guidance on how to calculate the threshold for parent company financial information when the registrant has a consolidated shareholders' deficit.

  • Dataline
    Dataline: Discontinued operations - Revised standard significantly changes criteria for discontinued operations and disclosures for disposals (revised June 3, 2014*) (No. 2014-08)

    5/30/14 | Assurance services

    The FASB recently changed the threshold for reporting discontinued operations and added new disclosures about disposals. Read on for details and PwC observations.

  • Webcast
    Initial Public Offerings process webcast - On demand (CPE-eligible) version available

    Assurance services

    Companies often begin their preparations for going public well before they launch the IPO process. There are a number of common accounting and reporting issues that a company will face as part of the IPO process and related areas that are often the focus of SEC reviews. Watch a replay or participate in the on demand (CPE-eligible) version of this webcast.

  • Valuation multiples and purchase allocation trends

    5/22/14 | Transaction services

    What are the latest comparable statistics for mergers and acquisitions and active trades in the financial services industry? Check out PwC's quarterly valuation summaries for the Banking, Insurance and Asset Management sectors. Insights include: trends in market multiples, related transactions, and transaction benchmarking analysis.

  • IPR&D acquired in a business combination – How many pieces?

    5/21/14 | Pharmaceuticals & life science

    This Pharmaceutical and Life Sciences Alert focuses on in-process research and development (IPR&D) in acquisition accounting.

  • In the loop
    In the loop: How new accounting elections could affect your deal or IPO strategy

    5/20/14 | Assurance services

    In the loop is an executive-level series addressing important financial reporting and regulatory issues. Our first edition discusses how changes in private company accounting could affect future deal or financing strategies.

  • M&A snapshot
    Cross-border acquisitions - Accounting considerations relating to income taxes (M&A snapshot)

    5/12/14 | Assurance services

    In cross-border deals, the acquisition of a foreign business can introduce complexities in accounting for income taxes.

  • Evaluating environmental liabilities and their impacts on future earnings (Observations from the front lines)

    5/12/14 | US Capital Markets and Accounting Advisory Services

    Unexpected expenditures and accounting adjustments – like those arising from environmental obligations – can dramatically impact capital budgeting and future earnings. Companies have found that practices vary widely across sectors and both engineering and accounting expertise are critical in assessing environmental obligations.

  • Webcast
    Mergers & Acquisitions Webcast - May 20, 2014 - On-demand version available

    Assurance services

    Did you miss our Mergers & Acquisitions webcast on Tuesday, May 20th? If so, you still have an opportunity to view the webcast and earn CPE credit through our on-demand version. This webcast features Beth Paul, PwC Strategic Thought Leader, Ravi Rao, National Office SEC Services Partner, and Dimitri Drone and Matt Sabatini, both Partners in our Transaction Services group. It covers accounting, financial reporting and valuation considerations in connection with the acquisition of a business.

  • Private company reporter
    Private company reporter - PCC continues discussions on intangible assets

    5/1/14 | Assurance services

    The PCC continued redeliberation of an alternative for intangible assets in a business combination but made no decision.

  • In brief
    In brief: FASB issues final standard redefining discontinued operations

    4/11/14 | Assurance services

    The FASB revised the threshold for reporting a discontinued operation and changed many disclosures about disposals.

  • M&A snapshot
    Cross-border acquisitions - Navigating SEC reporting requirements (M&A snapshot)

    4/7/14 | Assurance services

    This is the second in our series focused on navigating the waters of a cross-border acquisition. The series looks at various aspects along the deal continuum, including pre-acquisition due diligence and strategies, financial reporting requirements, tax implications, and post-acquisition considerations. This edition provides insights on SEC and other financial reporting requirements that may apply in a cross-border acquisition.

  • Corporate Governance Series
    The Quarter close: Directors edition Q1 2014

    3/27/14 | Center for Board Governance

    This quarterly publication is designed to keep directors informed about the latest accounting and financial reporting issues.

  • Private company accounting alternatives on goodwill (Observations from the front lines)

    3/25/14 | US Capital Markets and Accounting Advisory Services

    Recently the FASB issued an Accounting Standards Update to permit private companies to amortize goodwill acquired in a business combination, and to apply a simplified goodwill impairment model. This change is intended to help reduce reporting complexity for private companies; however, private companies should carefully consider this alternative, especially for those considering an initial public offering.

  • Video
    New goodwill standard for private companies

    3/17/14 | Assurance services

    PwC's Kirsten Schofield, John Stieg, and Jim Gazley discuss the PCC's newly issued goodwill standard and navigating the choice to adopt or not.

  • Dataline
    Dataline: Goodwill accounting alternative - FASB and PCC issue final standard for private companies (No. 2014-05)

    3/10/14 | Assurance services

    The FASB and PCC have issued a new accounting standard for private companies that is intended to simplify the goodwill accounting model.

  • M&A snapshot
    Cross-border acquisitions - Due diligence and pre-acquisition risk considerations (M&A snapshot)

    3/6/14 | Assurance services

    This is the first in a series focused on navigating the waters of a cross-border acquisition. This edition focuses on the pre-acquisition phase, including how GAAP differences can impact valuation and how a company can manage the financial risk exposure that arises from a cross-border acquisition.

  • Private Company Platforms – NYSE ACE Portal & NASDAQ Private Market (Observations from the front lines)

    2/13/14 | US Capital Markets and Accounting Advisory Services

    The broadening of private company securities sales has helped drive the development of two new offerings from the NYSE and NASDAQ OMX. Both solutions, although different in approach and focus, are designed to provide a platform and market structure for private companies to manage and conduct the sale of private company securities.

  • Private company reporter
    Private company reporter - PCC amends, re-approves final VIE alternative for common control leasing arrangements

    1/31/14 | Assurance services

    In January, the PCC revised, then re-approved an alternative offering private companies an exemption from applying the VIE consolidation model to certain arrangements

  • Dataline
    Dataline: Assets acquired to be used in research and development activities - AICPA issues updated Accounting and Valuation Guide (No. 2014-04)

    1/30/14 | Assurance services

    The AICPA’s Financial Reporting Executive Committee (FinREC) recently issued an Accounting and Valuation Guide covering acquired in process research and development assets.

  • Being prepared in a hot IPO market (Observations from the front lines)

    1/23/14 | US Capital Markets and Accounting Advisory Services

    Strong demand for IPOs continued in the fourth quarter of 2013, capping a robust year for the capital markets and setting the stage for continued growth in 2014. The window for raising capital in a robust IPO market tends to open with bursts of popularity then close quickly. This requires a constant state of readiness for the required IPO document that is filed with the Securities and Exchange Commission “SEC”. Don’t let unforeseen financial reporting items be the road block to accessing the IPO markets.

  • Distinguishing a Business from an Asset or a Group of Assets

    1/16/14 | Pharmaceuticals & life science

    This Pharmaceutical and Life Sciences Industry GAAP Alert focuses on the key accounting considerations when making this determination and provides illustrative examples.

  • Practical tip
    Practical tip: Determining financial statement presentation for the acquisition of selected parts of an entity (No. 2014-02)

    1/9/14 | Assurance services

    This Practical tip highlights the guidance related to the determination of the financial statement presentation for the acquisition of selected parts of an entity.

  • Setting the standard
    Setting the standard - January 2014

    1/9/14 | Assurance services

    Welcome to the latest edition of "Setting the standard." It includes the latest updates on the standard-setting activities of the FASB and IASB. Learn more inside.

  • Corporate Governance Series
    The quarter close - Directors edition: A look at this quarter's financial reporting issues - Q4 2013

    12/23/13 | Center for Board Governance

    This quarterly publication is designed to keep directors informed about the latest accounting and financial reporting issues that impact board decisions and company policies.

  • Strategic Divestiture Alternatives – An efficient structure re-emerges (Observations from the front lines)

    12/17/13 | US Capital Markets and Accounting Advisory Services

    The re-emergence of a Mergers & Acquisitions (“M&A”) technique known as a “Reverse Morris Trust” (“RMT”) has proven to provide some unique advantages over other strategic alternatives as a vehicle for divesting divisions or a separate business. Companies considering a divestiture should become knowledgeable on the recent comeback of this strategic alternative so they can actively engage in conversations with their advisors.

  • Dataline
    Dataline: Highlights of the 2013 AICPA National Conference on Banks and Savings Institutions (No. 2013-26)

    12/12/13 | Assurance services

    At the 2013 AICPA National Conference on Banks and Savings Institutions, regulators and standard setters shared views on top-of-mind issues for financial institutions.

  • In brief
    In brief: FASB endorses final private company accounting alternatives on goodwill and certain interest rate swaps (No. 2013-48)

    11/26/13 | Assurance services

    On November 25, the FASB endorsed the first two accounting alternatives previously approved by the PCC, which address the accounting for goodwill and interest rate swaps.

  • Dataline
    Dataline: Testing Goodwill for Impairment - AICPA issues Accounting and Valuation Guide (No. 2013-24)

    11/25/13 | Assurance services

    Issues continue to arise in connection with goodwill impairment testing. A new AICPA guide provides guidance and illustrations related to goodwill impairment testing.

  • In brief
    In brief: Discontinued operations – FASB to issue final standard (No. 2013-46)

    11/15/13 | Assurance services

    The FASB completed redeliberations and voted to issue a final standard that will change criteria for determining which disposals are presented as discontinued operations.

  • Private company reporter
    Private company reporter - PCC approves alternative that exempts certain arrangements from VIE guidance

    11/15/13 | Assurance services

    The PCC approved a final standard that offers private companies an exemption from applying the VIE consolidation model to certain common control leasing arrangements.

  • Debt refinancing in an uncertain rate environment (Observations from the front lines)

    11/5/13 | US Capital Markets and Accounting Advisory Services

    The economic business environment continues to improve and interest rates in the most recent year remain low, although there is concern that they may rise in the near term. Companies who have seen their credit outlook recover, and/or want to take advantage of the current lower interest rate environment, may consider refinancing their existing debt. Companies have found that the financial reporting outcomes of such negotiations may not reflect the entire expected economic benefit.

  • Contingent Consideration in a Business Combination

    10/16/13 | Pharmaceuticals & life science

    This Pharmaceutical and Life Sciences Industry Alert provides guidance on the accounting for contingent consideration arrangements in business combinations.

  • Private company reporter
    Private company reporter - September 30 and October 1, 2013

    10/7/13 | Assurance services

    At its most recent meeting, the PCC approved final standards for the accounting for goodwill and for a simplified hedge accounting model for certain interest rate swaps.

  • Supply chain financing: What you need to know (Observations from the front lines)

    9/19/13 | US Capital Markets and Accounting Advisory Services

    Many companies are seeking to improve their working capital by reviewing the terms of their trade payables. To aid companies in streamlining their payables process, financial institutions built IT solutions to act as an intermediary between purchaser and supplier. As an intermediary, financial institutions can offer a liquidity solution to the supplier by way of factoring their receivables.

  • PwC comment letter (FASB)
    PwC comments on the proposed ASU, Accounting for Goodwill, a proposal of the Private Company Council

    8/29/13 | Assurance services

    PwC supports a broader reconsideration of the financial reporting model for goodwill for all entities.

  • PwC comment letter (FASB)
    PwC comments on the PCC's proposed ASU, Accounting for Identifiable Intangible Assets in a Business Combination

    8/29/13 | Assurance services

    PwC supports a more comprehensive reconsideration of the existing model for identifiable intangible assets in a business combination for all entities.

  • PwC comment letter (FASB)
    PwC comments on the proposed ASU: Reporting Discontinued Operations

    8/14/13 | Assurance services

    In our comment letter we support efforts to develop an improved definition of discontinued operations, however we do not agree with some of the proposed disclosures.

  • EITF observer
    EITF observer: A meeting synopsis - June 2013

    6/14/13 | Assurance services

    The EITF met on June 11, 2013 to discuss six issues. PwC's EITF observer provides you an insightful summary of decisions reached and the changes affecting US GAAP.

  • Private company reporter
    Private company reporter - June 13, 2013

    6/13/13 | Assurance services

    On June 10, the FASB endorsed each of the accounting alternatives previously approved by the PCC, related to intangible assets, goodwill and interest rate swaps. This edition of Private company reporter provides further information on the proposed alternatives, as well as highlights of other recent developments related to private company reporting.

  • Dataline
    Dataline: A summary of the FASB’s proposal on reporting discontinued operations (No. 2013-12)

    6/7/13 | Assurance services

    PwC provides details and thoughtful insights on the FASB's proposal to change the reporting of discontinued operations. This Dataline outlines the key details of the FASB’s proposal and includes PwC’s insights about how the proposed changes may impact current practice.

  • Point of view
    Point of view: Consolidation - A single model would enhance information reported to investors

    5/6/13 | Assurance services

    This Point of view highlights that a single definition of control leading to one consolidation model in the U.S. would benefit all stakeholders.

  • M&A snapshot
    We’re acquiring a company with significant in-process research and development (IPR&D) activities. What's next? (M&A snapshot)

    4/23/13 | Assurance services

    This edition of Mergers & acquisitions — a snapshot provides an overview of the accounting rules and a glimpse into some of the issues companies face in the accounting and valuation of acquired IPR&D.

  • EITF observer
    EITF observer: A meeting synopsis - March 2013

    3/18/13 | Assurance services

    At the EITF's March 14 meeting, the Task Force discussed four Issues, reaching a final consensus on two issues (12-B and 12-G) and consensus-for-exposure on one Issue (13-B). Further discussion is expected on one issue (12-F). This edition of EITF observer provides a synopsis of the meeting.

  • Standard setters revisit push down accounting requirements (Observations from the front lines)

    2/21/13 | US Capital Markets and Accounting Advisory Services

    Push down accounting refers to instances in which an acquiring entity (or parent company) pushes its new basis down to the stand-alone financial statements of an acquired entity. The Emerging Issues Task Force (EITF) is in discussions regarding the circumstances that drive a change in accounting basis or an acquired entity's stand-alone financial statements. Potential changes could result in more instances where push down accounting is required.

  • PwC comment letter (FASB)
    PwC Comments on Proposed ASU: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities

    1/7/13 | Assurance services

    PwC agrees with the proposed change to limit the disclosures to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset or subject to a master netting arrangement or similar agreement.

  • Dataline
    Dataline: Highlights of the 2012 AICPA National Conference on Current SEC and PCAOB Developments (No. 2012-22)

    12/13/12 | Assurance services

    The 2012 AICPA National Conference on Current SEC and PCAOB Developments (the Conference) was held on December 3, 4, and 5, 2012. Conference presenters included representatives from regulatory and standard-setting bodies, auditors, users, preparers, industry experts, and an investor panel. Remarks centered mainly on the status of potential incorporation of IFRS into the U.S. financial reporting system, updates on regulatory and financial reporting matters, capital formation, and the auditing profession’s impact on the reliability and usefulness of financial statements.

  • M&A snapshot
    Financial risk management considerations in an acquisition (M&A snapshot)

    12/13/12 | Assurance services

    The acquisition of a business can have a significant impact on both the risk exposures and risk management strategies of the combined entity. In many cases, an acquirer’s financial risk exposure will increase as a result of the acquisition. However, there may be situations in which the acquiree’s operations reduce the acquirer’s current risk exposure. In any event, identifying potential changes in enterprise risks, creating an action plan to address them, and managing changes to risk management strategies post-acquisition are critical to developing short- and long-term solutions for integrating financial risk management considerations in an acquisition.

  • Dataline
    Dataline: 2012 year-end accounting and reporting considerations - Leading practices and lessons learned on key topics (No. 2012-20)

    12/3/12 | Assurance services

    This year end, entities continue to face many complex financial reporting issues such as providing new fair value disclosures, accounting for debt modifications, and evaluating revenue recognition guidance. Economic challenges around the world continue to have broad financial reporting implications. While not an all-inclusive list, this Dataline is intended to serve as a timely reminder of leading practices and lessons learned on key issues that companies should consider as they navigate the year-end financial reporting process.

  • PwC comment letter (FASB)
    PwC Comments on Proposed ASU: The Liquidation Basis of Accounting

    10/8/12 | Assurance services

    PwC suggests enhancements to the proposed guidance in the event that others believe it will be helpful to preparers and financial statement users and will improve consistency as to when and how to prepare financial statements using the liquidation basis of accounting.

  • Video
    IFRS: M&A perspectives

    9/17/12 | Assurance services

    IFRS: M&A perspectives

  • Dataline
    Dataline: Indefinite-lived intangible asset impairment -- FASB issues guidance that simplifies impairment test and allows early adoption (No. 2012-08)

    8/17/12 | Assurance services

    The FASB issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (the revised standard), on July 27, 2012. The revised standard is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a "qualitative" assessment to determine whether further impairment testing is necessary. The approach is similar to the guidance finalized last year for goodwill impairment testing. This Dataline looks at the key provisions of the revised standard and offers our observations.

  • M&A snapshot
    Don't let push-down accounting push you around (M&A snapshot)

    4/25/12 | Assurance services

    Companies preparing to go public often face a number of issues related to their financial statements. A common issue is whether push-down accounting should be applied. Push-down accounting is the practice of adjusting the standalone financial statements of an acquired company to reflect the basis of accounting of the buyer. This edition of Mergers & acquisitions - a snapshot, provides an overview of the SEC's rules on push-down accounting and a high-level summary of the complexities and opportunities that can arise in applying the rules to common deal structures.

  • EITF observer
    EITF observer: A meeting synopsis - March 2012

    3/18/12 | Assurance services

    At the EITF's March 15 meeting, the EITF discussed six Issues, reaching a consensus-for-exposure on three Issues. The remaining three Issues will be discussed further at a future meeting.

  • M&A snapshot
    Did I buy a group of assets or a business? Why should I care? (M&A snapshot)

    12/14/11 | Assurance services

    Determining whether an acquired group of assets is a business has proven to be one of the more challenging aspects of applying the current M&A accounting guidance. For many transactions, the determination will be straightforward. However, the current guidance will cause many transactions that are "on the edge," and previously would have been accounted for as asset acquisitions, to be accounted for as business combinations. This edition identifies relevant considerations in determining whether a business has been acquired and why it matters not only upon acquisition but also for disposals and public company reporting.

  • M&A snapshot
    Market participants: how their views impact your values (M&A snapshot)

    9/26/11 | Assurance services

    In a business combination, buyers are required to record the acquired assets and assumed liabilities of a business at their fair values. Fair value reflects the price that market participants would receive to sell an asset or pay to transfer a liability. Assets and liabilities may be used differently by different market participants, resulting in variations in values. Therefore, a market participant's view is an important aspect of the valuation process as a buyer cannot look only to its own intended use of an asset or its ability to transfer a liability at a certain price. This publication provides insight on the identification of market participants, as well as how entities can develop market participant assumptions.

  • M&A snapshot
    Noncontrolling interests -- why minority shareholder rights matter (M&A snapshot)

    12/16/10 | Assurance services

    The M&A Standards changed how a parent reports the minority shareholder interests in a partially owned subsidiary in its consolidated financial statements. The minority shareholder interests, or noncontrolling interests (''NCI''), are generally presented within equity as if the parent and the minority shareholders have similar economic interests. Previously, NCI were generally presented between liabilities and equity (''mezzanine equity''). This edition focuses on the classification of redeemable NCI and how different minority shareholder rights may lead to different financial reporting by the parent.

  • M&A snapshot
    Carve-out Financial Statements--A challenging process (M&A snapshot)

    9/30/10 | Assurance services

    In many M&A transactions, companies looking to dispose of non-core businesses or to generate cash may sell only a portion of their operations (e.g., a subsidiary or a business unit). As part of these transactions, a seller may need, or want, to prepare separate financial statements of the operations being sold, commonly referred to as carve-out financial statements. The preparation of these financial statements can be challenging as there is limited guidance covering their composition. This volume of Mergers & Acquisitions - A snapshot, focuses on some of the issues companies may face when preparing carve-out financial statements, how those statements may differ from their own financial statements, and how the M&A Standards may impact...

  • M&A snapshot
    The Consolidation Standard--determining who consolidates is just the beginning (M&A snapshot)

    3/11/10 | Assurance services

    FASB Accounting Standard Codification Topic 810 incorporates FAS 167, Amendments to FASB Interpretation No. 46(R)), which is the U.S. standard on consolidation (the Consolidation Standard). The Consolidation Standard is effective as of January 1, 2010 for calendar year end companies and the impact will soon be reported in the first quarter reporting cycle. As a result of applying the new guidance, certain entities may need to be consolidated while other entities may need to be deconsolidated. Determining who consolidates is just the beginning.

  • M&A snapshot
    Accounting for contingent consideration - Don't let earnouts lead to earnings surprises (M&A snapshot)

    2/25/10 | Assurance services

    In many M&A transactions, when the buyer and seller cannot agree on the total purchase price in an acquisition, the two parties agree to an additional payment, or contingent consideration, based on the outcome of future events. These payments are commonly referred to as earnouts and are typically based on revenue or earnings targets that the acquired company must meet after the acquisition date. The accounting for these arrangements under the M&A Standards represents a significant change from past practice.

  • Tax accounting insights
    Goodwill impairment testing: Tax considerations

    12/21/09 | Tax accounting services

    Goodwill impairment testing continues to be a challenging and complex area of practice. As companies perform goodwill assessments, tax considerations can play a critical role in the final conclusions. To assist you with your goodwill impairment testing, PwC has refreshed our Goodwill Impairment Testing: Tax Considerations publication (originally released in December 2009).

  • M&A snapshot
    Acquired assets not intended to be used: You may need to record them, even if you don't use them! (M&A snapshot)

    11/30/09 | Assurance services

    In many M&A transactions, a buyer may acquire assets it does not intend to use. Prior to the M&A Standards, buyers generally would assign little or no value to assets that are not intended to be used when accounting for an M&A transaction. Now, such assets are required to be recognized at fair value from a market participant perspective, even if that perspective differs from that of the actual buyer. One common type of asset that a buyer does not intend to actively use that is receiving considerable attention is called a "defensive asset."

  • M&A snapshot
    Accounting for partial acquisitions and disposals - it's not so simple! (M&A snapshot)

    7/1/09 | Assurance services

    Accounting for partial acquisitions and disposals - it's not so simple! In an economic environment where many companies are buying and selling portions of businesses, the M&A Standards will have an impact on how companies account for these types of transactions. At first glance, the fundamental concept of "control" that drives the accounting seems easy to understand. If a company gains control, the acquisition is a business combination. If a company loses control, it deconsolidates the subsidiary. If a company maintains control, the transaction is recorded in equity. Simple, right? Not so fast!

  • M&A snapshot
    Doing a deal? Be careful about employee compensation decisions (M&A snapshot)

    4/1/09 | Assurance services

    Doing a deal? How will you compensate employees of the target? The new M&A Standards may impact your decision. Determining whether employee arrangements represent compensation for service prior to and/or after the acquisition will have a direct impact on the amount included as purchase price versus the amount expensed in the future. This installment of Mergers & Acquisitions - A snapshot explores some of the more common issues related to employee compensation arrangements typically seen in business combinations... contingent consideration, golden parachutes and stay bonuses, and exchanges of stock compensation awards. Employee compensation decisions agreed upon during deal negotiations could impact the acquirer's future financial results.

  • M&A snapshot
    Even your tax rate will change (M&A snapshot)

    3/1/09 | Assurance services

    Are you ready for volatility in your effective tax rate? The new M&A standards will likely impact a company's effective tax rate. This impact will be felt by acquisitive companies in all industries, public and private, and as early as the first quarter of 2009 because parts of the new M&A standards apply to prior acquisitions. This installment of Mergers & Acquisitions—A snapshot focuses on how the accounting for merger and acquisition transactions will create volatility in an acquirer's effective tax rate in periods before and after an acquisition.

  • M&A snapshot
    Deal or no deal: Why you should care about the new M&A standards (M&A snapshot)

    2/1/09 | Assurance services

    Did you know that the new M&A standards could impact your company regardless of whether you plan to close a deal? Given the current economic environment, understanding the new M&A standards may not be a priority for many companies, particularly if M&A activity is not on the horizon in the foreseeable future. However, companies should be careful not to overlook the new M&A standards, as they may have a significant impact, even without a deal. This installment of Mergers & Acquisitions - A snapshot will help you avoid last-minute surprises by understanding how the new accounting and reporting standards for M&A may affect your financial reporting even though you haven’t closed a deal.

  • M&A snapshot
    Goodwill impairment testing: What's old is new again (M&A snapshot)

    12/1/08 | Assurance services

    Since the adoption of FAS 142, the goodwill impairment standard, the equity markets have generally trended upward. Accordingly, impairments may not have been as frequent as we expect to see them today. This edition of Mergers & Acquisitions - A snapshot, focuses on some of the issues companies may face in preparing goodwill impairment tests in the current environment. It also serves as a refresher on certain aspects of the framework for conducting those tests.

  • M&A snapshot
    How timing your transactions in light of the new standards will impact your business and communication with stakeholders (M&A snapshot)

    10/1/08 | Assurance services

    Recognizing that the new standards affecting mergers and acquisitions — FAS 141(R) and FAS 160 — will dramatically change the way companies negotiate and account for M&A, PwC has launched the first in a series of publications that will help companies keep abreast of emerging issues resulting from the new standards, as well as provide them with ideas on modifying current strategies and employing new ones for future deals. This first installment of Mergers & Acquisitions - A snapshot focuses on how the accounting treatment for M&A transactions will depend considerably on whether the deal closes before or after the effective date of the new standards.