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 edition 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 the accounting for transactions that are reported in the carve-out financial statements.
* 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.
** 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”).
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