Key changes at a glance

Key challenges
  • Addressing new valuation requirements
  • Ensuring investors understand the impact of the new standards on how operating performance is reported
  • Communicating deal costs and benefits to investors
  • Deciding the appropriate deal structure to address the impacts on earnings
  • Forecasting the performance measures of the deal
As well as:
  • Transitioning financial and tax reporting processes
  • Assessing impact on debt covenants and other financing or regulatory arrangements
Key changes
  • More acquisitions will qualify as a "business"
  • Expensing of all transaction and most restructuring costs
  • Earn-out arrangements may need to be remeasured at fair value
  • Acquired in-process research & development will no longer be expensed at acquisition
  • Equity securities issued as part of the purchase price will be valued on the closing date, not at the date when the deal was announced
As well as:
  • Minority interest earnings will be included in net income
  • When control is obtained, regardless if it’s less than 100%, the buyer will recognize 100% of the net assets of the acquired business, including goodwill, at fair value
  • More contingencies will be recorded at fair value
  • Adjustments to realizability of tax assets and uncertainties that do not qualify as measurement period adjustments will be recorded to income
Key impacts
  • Expensing transaction and restructuring costs increases transparency and dilutes earnings
  • Reassessing certain fair-valued items such as earn-outs will trigger earnings volatility
  • Due diligence will require greater precision, especially regarding financial projections and deal accounting
  • Valuations will take on added importance and urgency
  • Operating and financial performance metrics could be impacted
As well as:
  • Changes influence acquisition negotiations and deal structures
  • Shareholder communications may need to be reassessed
  • Tracking of acquired research and development projects may need to be improved