Build better valuation models

Accounting for deals has become increasingly complex as financial reporting continues moving to a fair value model. Understanding the reporting requirements and how your decisions may impact future earnings is more important than ever. To structure and communicate M&A deals effectively, companies should understand the impact of acquisition accounting on the newly merged company’s earnings.

 

"Deal makers who rely on both in-depth tax and financial reporting knowledge know that purchase price standards and defined value can differ significantly between the two valuation processes."

Understanding book versus tax valuation differences improves M&A planning and reporting

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"The pitfalls of relying on high-level bench-marking studies to estimate acquisition accounting impacts were evidenced by the challenges identified by our webcast participants."

How revised M&A accounting standards are impacting deals

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"The shareholder value framework can be expanded to properly accommodate the difficult-to-quantify benefits of an acquisition target’s sustainability initiatives."

How revised M&A accounting standards are impacting deals

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"36% of deal executives said greater earnings volatility was the biggest impact of the acquisition accounting rules."

Source: PwC webcast on “How deals have changed: Lessons learned from applying the revised M&A accounting standards”, January 2011

 

Brand-rich transactions can be fraught with accounting and valuation complexities. The main reason is that the term brand typically encapsulates multiple components above and beyond just simple trade names. Learn more

 

Uncovering valuation blink spots: How to aviod overpaying for deals

Uncovering blind spots in deal valuations

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Valuation involves more than determining “a number to book” for your transaction. Taking a combined approach that integrates a focus on industry issues — and the accounting and tax impacts — helps meet the challenges of today’s dynamic deal environment. That way, you can strive for greater insight into deal value drivers while avoiding restatement risk and anticipate the needs of auditors and regulators. A focus on a more robust pre-acquisition valuation of the deal will also help mitigate the risk of acquisition accounting estimates being significantly different from what is ultimately recorded at transaction close. This has become important since the new accounting standards increased the potential for post-close earnings volatility. You will be better positioned to assess the accretive or dilutive impact of a transaction if an effective pre-acquisition valuation is performed during the due diligence phase. PwC’s valuation specialists can help you perform a robust valuation analysis in the diligence phase that can be converted into a post-deal valuation required for financial reporting and tax needs, and mitigate the risk of earnings surprises post-deal.

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Click here to learn how one company was able to effectively document fair value for both tax and financial reporting purposes.