scholarly journals New Accounting Guidance For Business Combinations

2011 ◽  
Vol 1 (1) ◽  
Author(s):  
Allen W. McConnell ◽  
Bill D. Cox ◽  
John E. Elsea
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Business Combinations ◽  
Accounting Principles ◽  
Business Combination

The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141 Business Combinations in June 2001.  SFAS 141 supersedes Accounting Principles Board (APB) Opinion No. 16 Business Combinations and SFAS No. 38 Accounting for Preacquisition Contingencies of Purchased Enterprises.  APB Opinion 16 created two acceptable methods of accounting for a business combination, the purchase and the pooling of interests methods.  These two different methods often resulted in very different financial results for economically similar transactions.

A HISTORY OF POOLING OF INTERESTS ACCOUNTING FOR BUSINESS COMBINATIONS IN THE UNITED STATES

1991 ◽  
Vol 18 (2) ◽  
pp. 155-192 ◽  
Author(s):  
Frank R. Rayburn ◽  
Ollie S. Powers
Keyword(s):  
Accounting Standards ◽  
The United States ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Business Combinations ◽  
Accounting Principles ◽  
History Of ◽  
Business Combination ◽  
The Subject

This paper traces the development of pooling of interests accounting for business combinations from 1945 to 1991. The history of the pooling concept is reviewed chronologically with particular emphasis on the events of 1969–1970 that were related to the most recent pronouncement on the subject, Accounting Principles Board (APB) Opinion No. 16. Early in its life (1974), the Financial Accounting Standards Board (FASB) placed a project on its agenda to reconsider pooling of interests accounting. That project was removed from the FASB's agenda in 1981. APB Opinion No. 16 has gone essentially unchanged as it relates to the accounting for a business combination as a pooling of interests. Resolution of implementation issues has been left largely to the Securities and Exchange Commission and the accounting profession. The FASB has a project on its agenda on Consolidations and Related Matters that may impact pooling of interests accounting. There also is some pressure for the FASB to revisit accounting for business combinations.

scholarly journals Revised Accounting For Business Combinations

2008 ◽  
Vol 1 (2) ◽  
pp. 13-20
Author(s):  
Arlette C. Wilson ◽  
Kimberly Key
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Business Combinations ◽  
Business Combination ◽  
Representational Faithfulness ◽  
Acquisition Method

The Financial Accounting Standards Board (FASB) has recently issued Statement of Financial Accounting Standards No. 141 (Revised 2007) Business Combinations. The object of this Statement is to improve the relevance, representational faithfulness, and comparability of reported information about a business combination and its effects. This Statement replaces FASB Statement No. 141, but retains the fundamental requirements that the acquisition method of accounting (previously called the purchase method) be used for all business combinations. Some of the changes related to the accounting for business combinations as a result of the new requirements are discussed and illustrated below.

scholarly journals On Narrowing The Credibility GAAP: Has The Financial Accounting Standards Board (FASB) Enhanced The Credibility Of Generally Accepted Accounting Principles (GAAP)?

2011 ◽  
Vol 9 (2) ◽  
pp. 76 ◽  
Author(s):  
Douglas K. Schneider ◽  
Gordon S. May ◽  
David R. Shaffer
Keyword(s):  
Accounting Standards ◽  
Psychological Research ◽  
Financial Accounting ◽  
Future Research ◽  
Financial Accounting Standards Board ◽  
Financial Reports ◽  
Generally Accepted Accounting Principles ◽  
Perceived Credibility ◽  
Accounting Principles ◽  
Social Psychological Research

The purpose of this study was to apply social-psychological research methods to address an issue of widespread concern in the accounting profession. One of the primary motives underlying the creation of the Financial Accounting Standards Board (FASB) was to increase the credibility of Generally Accepted Accounting Principles (GAAP). Our main objective was to assess any differences in the perceived credibility of FASB GAAP and pre-FASB GAAP, as indicated by three groups of FASB constituents familiar with these procedures: corporate preparers of financial statements (preparers), CPAs who audit financial reports to ensure their adherence to GAAP (auditors), and accountants who use financial reports to make lending and investment decisions (users). The results indicated that (a) the credibility of accounting principles can be assessed, (b) not all dimensions that have been touted as contributors to the credibility of accounting practices predict accountants perceptions of credibility, and (c) examples of FASB GAAP were perceived as less credible than corresponding examples of pre-FASB GAAP by each of the above three groups of FASB constituents. Some implications of these results and suggestions for future research are discussed.

How Informative Are Earnings Numbers That Exclude Goodwill Amortization?

2001 ◽  
Vol 15 (3) ◽  
pp. 243-255 ◽  
Author(s):  
Stephen R. Moehrle ◽  
Jennifer A. Reynolds-Moehrle ◽  
James S. Wallace
Keyword(s):  
Information Content ◽  
Cash Flow ◽  
Performance Measures ◽  
Intangible Assets ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Business Combinations ◽  
Traditional Performance

In the original exposure draft, Business Combinations and Intangible Assets, the Financial Accounting Standards Board (FASB) proposed that companies be allowed to report a second per share earnings number that excludes goodwill amortization. Subsequently, the FASB has proposed that goodwill not be amortized at all. Instead, it will be written down when impaired. In this study, we assess the information content of earnings excluding amortization of intangibles relative to two traditional performance measures: earnings before extraordinary items and cash flow from operations. We find that the relative informativeness of earnings before amortization and earnings before extraordinary items do not differ significantly. We also find, consistent with prior research, that both earnings before amortization and earnings before extraordinary items are more informative than cash flow from operations. These findings suggest that goodwill amortization disclosures were not decision-useful and, therefore, support the FASB's revised position.

scholarly journals Comparison of accounting methods for business combinations

2012 ◽  
Vol 60 (2) ◽  
pp. 315-324 ◽  
Author(s):  
Jaroslav Sedláček ◽  
Zuzana Křížová ◽  
Eva Hýblová
Keyword(s):  
Comparative Analysis ◽  
Accounting Standards ◽  
International Committee ◽  
Financial Accounting ◽  
Business Combinations ◽  
Financial Position ◽  
Analysis And Synthesis ◽  
Business Combination ◽  
Accounting Rules ◽  
The Impact

The revised accounting rules applicable to business combinations in force on July1st 2009, are the result of several years efforts the convergence of U.S. and International Committee of the Financial Accounting Standards. Following the harmonization of global accounting procedures are revised and implemented also Czech accounting regulations. In our research we wanted to see how changes can affect the strategy and timing of business combinations. Comparative analysis is mainly focused on the differences between U.S. and international accounting policies and Czech accounting regulations. Key areas of analysis and synthesis are the identification of business combination, accounting methods for business combinations and goodwill recognition. The result is to assess the impact of the identified differences in the reported financial position and profit or loss of company.

scholarly journals Accounting for Business Combinations (Topic 805)

2019 ◽  
Vol 5 (2) ◽  
pp. 1
Author(s):  
Dahli Gray ◽  
Ruben Torres
Keyword(s):  
Accounting Standards ◽  
Future Research ◽  
Financial Accounting Standards Board ◽  
Managerial Accounting ◽  
Business Combinations ◽  
Governmental Accounting ◽  
Ethical Implications ◽  
History Of ◽  
Business Combination ◽  
Contract Liability

This article discusses the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, as promulgated by the 2019 Accounting Standards Update (ASU) concerning Business Combinations. It focuses on revenue from contracts with customers. Several concerns regarding how and when to recognize an assumed liability after a business combination were raised by users and preparers of financial statements. Concerns emerged from the differing views on how a liability (that is, performance obligation) is defined within the FASB ASC Topic 606 regarding revenue from contracts with customers. Determining how and if a contract liability is recognized in a business combination from a revenue contract were the major concerns. This article reviews a brief history of business combinations and contracts with customers. It explores the issue from various accounting perspectives (such as financial and managerial accounting, tax accounting, governmental accounting issues, ethical implications, and international accounting). Potential questions for future research regarding this topic are presented. The 16 Comment Letters sent to the FASB are discussed. The results of a survey administered as part of this research are presented.

Inconsistencies in U.S. GAAP: Accounting for Executory Contracts

2006 ◽  
Vol 21 (3) ◽  
pp. 291-295 ◽  
Author(s):  
Timothy B. Forsyth ◽  
Michael T. Dugan
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Legal Form ◽  
Generally Accepted Accounting Principles ◽  
Case Research ◽  
Accounting Principles ◽  
Setting Process ◽  
Cpa Exam

This instructional case provides four different scenarios that illustrate the inconsistent treatment of various executory contracts under current generally accepted accounting principles (GAAP). The purpose of the case is threefold. First, it provides students an opportunity to use the Financial Accounting Research System (FARS) to resolve several accounting issues related to long-term executory contracts. Familiarity with FARS is essential, both for “real-world” use when students enter the accounting profession and for success on the computerized CPA exam, which includes case research. Second, as the Financial Accounting Standards Board (FASB) attempts to move toward principles-based standards (as opposed to rules-based standards), the case provides students an opportunity to observe that GAAP seems to be rules-based and theoretically inconsistent in the case of executory contracts. Third, the case can be used as a premise for discussing the standard-setting process and exploring differences between the economic substance of a transaction and its legal form.

Response to the FASB Invitation to Comment Identifiable Intangible Assets and Subsequent Accounting for Goodwill

2021 ◽  
Author(s):  
Shana Clor-Proell ◽  
Nerissa Brown ◽  
Stephen Stubben ◽  
Brian White ◽  
Elizabeth Blankespoor ◽  
...  
Keyword(s):  
Financial Reporting ◽  
Intangible Assets ◽  
Accounting Standards ◽  
Standard Setting ◽  
Financial Accounting ◽  
Future Research ◽  
Financial Accounting Standards Board ◽  
Accounting Standard ◽  
Business Combination ◽  
Accounting Standard Setting

In October 2019, the Financial Reporting Policy Committee of the Financial Accounting and Reporting Section of the American Accounting Association submitted a comment letter to the Financial Accounting Standards Board regarding the accounting for certain identifiable intangible assets acquired in a business combination and subsequent accounting for goodwill. This paper summarizes the content of the comment letter and discusses opportunities for future research on intangible assets that may inform accounting standard-setting decisions.

scholarly journals Principle-based versus rule-based accounting standards

2005 ◽  
Vol 79 (10) ◽  
pp. 475-485
Author(s):  
Ralph Ter Hoeven
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Rule Based ◽  
Accounting Principles ◽  
Verenigde Staten ◽  
Us Gaap

Als gevolg van het Enron-schandaal werd in de Verenigde Staten ferme kritiek geleverd op de rule-based structuur van US-General Accepted Accounting Principles (US-GAAP). Deze structuur zou teveel handvatten geven voor misbruik van managers en derhalve het herstel van het publieke vertrouwen in financiële markten in de weg staan. Zowel de Financial Accounting Standards Board (FASB) als de Security and Exchange Commission (SEC) hebben zich in de afgelopen periode uitgesproken over de wenselijkheid en haalbaarheid om US-GAAP te laten opschuiven naar een set van principle-based standards. In dit artikel worden de standpunten van achtereenvolgens de FASB en de SEC besproken en worden uitspraken gedaan over de verwachte richting van de aanpassingen binnen US-GAAP. Tevens geeft de auteur zijn visie over de optimale balans tussen rule-based-standards en principle-based standards mede aan de hand van recent verschenen Nederlandse literatuur.

An empirical analysis of an alternative model of Financial Accounting Standard no. 128

2018 ◽  
Vol 31 (4) ◽  
pp. 498-508 ◽  
Author(s):  
John E. McEnroe ◽  
Mark Sullivan
Keyword(s):  
Accounting Standards ◽  
Equity Capital ◽  
Financial Accounting ◽  
Average Increase ◽  
Financial Accounting Standards Board ◽  
Convertible Debt ◽  
Accounting Standard ◽  
Content Type ◽  
Accounting Principles ◽  
Median Increase

Purpose This paper aims to investigate the empirical effects of an inconsistency in the calculation of the diluted earnings per share (EPS) number which originated in Accounting Principles Board Opinion No. 15 (APB 15) and continues in Statement of Financial Accounting Standard No. 128 (SFAS 128), EPS. The discrepancy involves the treatment of dilutive warrants and options versus other dilutive convertible securities and is explained in the section of this paper where the authors describe the proposed alternative EPS model. In a sample of 55 publicly traded companies in which they applied their model, it was found that the average increase in diluted EPS to be 5.7 per cent and the median increase to be 3.8 per cent. The authors believe that SFAS 128 should be considered, along with other factors, to be revised to direct that diluted EPS be computed in accordance with their model. Design/methodology/approach The authors selected a sample of companies from the Compustat Annual Database that had either Convertible Debt or Convertible Stock or both with a year-end between July 1, 2011 and July 1, 2012 which was the most recent data available at the time of the initial study. They then used the model assuming a “repurchase” of common shares as if the “treasury stock method” which applies to options and warrants also applied to these conversions. They then reduced the number of shares initially used to compute diluted EPS by the number of assumed repurchased shares. Using the revised number of shares, the authors recomputed diluted EPS as a percentage of the originally reported diluted EPS. Findings For the 55 companies in the sample, the average increase in diluted EPS using the “treasury stock method” was 5.7 per cent. The median increase was 3.8 per cent. The largest increase was 26.6 per cent and the smallest was 0 per cent. Research limitations/implications This is a one-year study of the sampled firms. A multi-year sample is recommended for further research. Also, the sample might be applied to foreign entities under the jurisdiction of IAS 33. Practical implications According to the Financial Accounting Standards Board (FASB) the price-earnings ratio of an equity is perhaps the most frequently cited statistic in the business of equity investments. As the denominator in the price-earnings ration is the “diluted” EPS figure calculated under generally accepted accounting principles (GAAP) under Statement of Financial Accounting No. 128 (SFAS 128), the results have very significant implications for the recommended study and revision of the diluted EPS statistic. Social implications If the current diluted EPS reported numbers result in lower stock prices than would otherwise be the case under the authors’ model, then it seems likely that these companies with large amounts of debt would have a higher cost of equity capital than would otherwise be the case. The overall result would be a different allocation of equity capital than would be the case if convertible debt and convertible equity were treated the same way as options and warrants. As we are unaware of a rationale for the disparate treatment, it is believed that this a is a misallocation caused by a statement of the Financial Accounting Standards Board (FASB) that seems flawed and recommend that it be considered to be revised. Originality/value A review of the literature found no other study addressing this issue.

Sign in / Sign up

Export Citation Format

Share Document