Even your tax rate will change

Mergers & acquisitions - a snapshot Mar 01, 2009

This edition 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.

Overview

The acquisition of a business will likely impact a company’s effective tax rate as a result of the M&A Standards. Accounting Standards Codification 805 is the US standard on business combinations, Accounting Standards Codification 810 is the US standard on consolidation and noncontrolling interests (collectively the “M&A Standards”). In some cases, the effective tax rate will increase. In other cases, it will decrease. Either way, the rate will become more volatile, and less predictable, sometimes for several years following a significant acquisition.

This impact will be felt by acquisitive companies in all industries, public and private. Additionally, companies emerging from bankruptcy may be affected by the M&A Standards and may experience similar volatility in their effective tax rate in post-bankruptcy periods.

This edition 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.

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*This snapshot, updated since its original issuance to reflect changes for, among other things, contacts and branding, contains guidance that remains relevant as of the publication date.

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