A Gain by Any Other Name: Accounting for a Bargain Purchase Gain

2015 ◽  
Vol 30 (3) ◽  
pp. 233-248
Author(s):  
Mark J. Kohlbeck ◽  
Thomas J. Smith
Keyword(s):  
Fair Value ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Accounting Standard ◽  
Business Combinations ◽  
Market Values ◽  
Accounting Courses ◽  
Value Estimation ◽  
Net Assets ◽  
The Impact

ABSTRACT Students gain insight into a unique accounting treatment in acquisition accounting by completing this case—that of a bargain purchase gain (BPG). In December 2007, the Financial Accounting Standards Board (FASB) revised accounting for business combinations when they promulgated Statement of Financial Accounting Standard No. 141R, Business Combinations. Under the revised standard, acquirers record net assets of the acquiree at their respective fair market values at the time of acquisition and recognize the excess of net assets over the consideration paid as a BPG included in income from continuing operations. This case takes place after the acquisition is negotiated and the consideration is agreed upon. Students are required to estimate fair values of acquired net assets based on the information provided, determine whether goodwill or a bargain purchase gain exists, and evaluate the impact of this transaction on the financial statements. The case also requires students to consider subjectivity within the analysis, as well as to identify potential incentives that may influence certain estimates and judgments that managers make. The case is appropriate for accounting courses where business combinations, goodwill, and fair value estimation are discussed.

Is Negative Goodwill Valued by Investors?

2010 ◽  
Vol 24 (3) ◽  
pp. 333-353 ◽  
Author(s):  
Eugene E. Comiskey ◽  
Jonathan E. Clarke ◽  
Charles W. Mulford
Keyword(s):  
Acquisition Cost ◽  
Fair Value ◽  
Securities Markets ◽  
Compelling Evidence ◽  
Fair Value Accounting ◽  
Accounting Standard ◽  
Business Combinations ◽  
Net Assets

SYNOPSIS: Accountants have historically distanced themselves from the concept of negative goodwill on the premise that bargain purchases should not take place in the presence of efficient securities markets. This position has been a powerful influence on the accounting for negative goodwill for over half a century. However, in line with the expansion of fair value accounting, the latest accounting standard that addresses negative goodwill, SFAS No. 141(R), Business Combinations (FASB 2007), calls for the full recognition of bargain-purchase (negative goodwill) amounts. Rather than allocating some or all negative goodwill against selected acquired assets, as has been done previously, negative goodwill is now to be recognized in the year of the acquisition as a regular item of income or gain. In essence, SFAS No. 141(R) holds that the excess of the fair value of net assets acquired over the acquiring firm’s acquisition cost constitutes the receipt of value to the acquiring firm, and should be recognized as such. While this position may seem plausible, to our knowledge there has been no research that tests whether negative goodwill is valued. Based upon a sample of acquisition transactions involving negative goodwill, our research does not provide compelling evidence that markets value negative goodwill.

scholarly journals ANALISIS PERLAKUAN AKUNTANSI AGRIKULTUR PADA PETANI KELAPA PADA DESA DI DAERAH LIKUPANG SELATAN : DAMPAK RENCANA PENERAPAN ED PSAK NO.69 TENTANG AGRIKULTUR

2016 ◽  
Vol 11 (2) ◽  
Author(s):  
Claudia W.M. Korompis
Keyword(s):  
Financial Management ◽  
Descriptive Analysis ◽  
Accounting Standards ◽  
Fair Value ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Traditional System ◽  
The Face ◽  
The Impact ◽  
The Village

Biological assets is a unique asset, because of the transforming growth even after biological assets generate an output. Although it has many unique, but the financial management of biological assets still have to refer to the Financial Accounting Standards. Currently the Financial Accounting Standards Board (DSAK) issued SFAS No. ED 69 on agriculture which will come into force on 1 January 2017. According to this SFAS Biological assets are measured at initial recognition and at the end of each reporting period at fair value less costs to sell. Many of Regions, especially in the village do not know the accounting treatment for biological assets. This makes researchers want to analyze the impact of the application of IAS 69 ED is the continuation of agricultural farmers' efforts in this regard coconut trees in the village in the district South Likupang. With the proper financial management from the village, will support the country's economy as a whole, especially in the face of the MEA. This research uses descriptive analysis. The results of this study indicate that in general the village in the Regional South Likupang not apply to recognize the fair value of their assets. The traditional system by recognizing the asset at the acquisition price is still the basis in preparing the financial statements. But with this study are expected, farmers / entrepreneurs start applying SFAS palm plant began in 2017. Keywords: Accounting, Agriculture, ED IAS 69, Village.

scholarly journals An Alternative Method Of Accounting For Stock Options

2014 ◽  
Vol 30 (2) ◽  
pp. 439
Author(s):  
Thomas Smith ◽  
Adrian Valencia ◽  
Ara Volkan
Keyword(s):  
Stock Options ◽  
Intrinsic Value ◽  
Market Price ◽  
Fair Value ◽  
Financial Accounting ◽  
Employee Stock Options ◽  
Financial Accounting Standards Board ◽  
Exercise Price ◽  
The Difference ◽  
The Impact

<p>Currently, the grant date fair value of employee stock options is expensed over the vesting period. Our study introduces a new valuation approach for stock options and examines the impact of this change on earning per share (EPS) for a sample of firms over the period 2002-2011. The new valuation approach provides data useful to the Financial Accounting Standards Board (FASB) as it determines whether to revise the current option accounting rules. Under the proposed approach, options are valued at their intrinsic value on the grant date (i.e., the opportunity cost or the economic promise associated with the difference between the exercise price of the option and the market price of the stock at each measurement date) and further revalued each reporting date until the options are exercised.</p>

The Financial Statement Effects of Eliminating the Pooling-of-Interests Method of Acquisition Accounting

2000 ◽  
Vol 14 (1) ◽  
pp. 1-19 ◽  
Author(s):  
Benjamin C. Ayers ◽  
Craig E. Lefanowicz ◽  
John R. Robinson
Keyword(s):  
Balance Sheet ◽  
Financial Accounting ◽  
Financial Statement ◽  
Financial Accounting Standards Board ◽  
Pooling Problem ◽  
Corporate Acquisitions ◽  
Accounting Standard ◽  
Business Combinations ◽  
Public Corporations ◽  
Income Statement

Accounting standard setters have become increasingly concerned with the perceived manipulation of financial statements afforded by the pooling-of-interests (pooling) method of accounting for corporate acquisitions. While different restrictions have been discussed, in September 1999 the Financial Accounting Standards Board (FASB) issued an Exposure Draft to eliminate the pooling method. This study provides a basis for evaluating restrictions on the pooling method by analyzing the financial statement effects on pooling acquisitions made by public corporations over the period 1992 through 1997. Using these acquisitions we (1) quantify the scope of the “pooling problem,” (2) estimate the financial statement repercussions of eliminating the pooling method, and (3) examine the effects of restricting pooling accounting to business combinations meeting various “merger of equals” restrictions. While our analysis does not address whether restrictions on the pooling method will influence the nature or level of acquisition activity, the results indicate that the pooling method generates enormous amounts of unrecognized assets, across individual acquisitions, and in aggregate. In addition, our results suggest that recording and amortizing these assets generate significant balance sheet and income statement effects that vary with industry. Regarding restrictions on the pooling method, our analysis indicates that size restrictions would significantly reduce the number and value of pooling acquisitions and unrecognized assets generated by these acquisitions.

THE EVOLUTION OF THE RELATIONSHIP BETWEEN THE US FINANCIAL ACCOUNTING STANDARDS BOARD AND THE INTERNATIONAL ACCOUNTING STANDARD SETTERS: 1973–2008

2012 ◽  
Vol 39 (1) ◽  
pp. 1-51 ◽  
Author(s):  
Robert J. Kirsch
Keyword(s):  
Accounting Standards ◽  
Financial Accounting ◽  
Working Relationships ◽  
International Accounting ◽  
International Accounting Standards ◽  
Financial Accounting Standards Board ◽  
Accounting Standard ◽  
Staff Members ◽  
The Us ◽  
The Relationship

ABSTRACT Utilizing archival materials as well as personal interviews and correspondence with personnel of the Financial Accounting Standards Board (FASB) and International Accounting Standards Committee/Board (IASC/B), including former Board chairmen and staff members, this paper examines the development of the working relationships between the FASB and the IASC/B from their earliest interactions in 1973 through the transformation of the IASC into the IASB and the Convergence Program rooted in the 2002 Norwalk Agreement up to 2008.

scholarly journals Determination of the Value of Intangible Assets in the Companies of Lithuania

2017 ◽  
Vol 14 (2) ◽  
pp. 55-68 ◽  
Author(s):  
Rita Bužinskienė
Keyword(s):  
Financial Management ◽  
Intangible Assets ◽  
Fair Value ◽  
Financial Information ◽  
Financial Accounting ◽  
True Value ◽  
A Value ◽  
The Impact

AbstractIn accordance with generally accepted accounting standards, most intangibles are not accounted for and not reflected in the traditional financial accounting. For this reason, most companies account intangible assets (IAs) as expenses. In the research, 57 sub-elements of IAs were applied, which are grouped into eight main elements of IAs. The classification of IAs consists in two parts of assets: accounting and non-accounting. This classification can be successfully applied in different branches of enterprises, to expand and supplement the theoretical and practical concepts of the company's financial management. The article proposes to evaluate not only the value of financial information for IAs (accounted) but also the value of non-financial information for IAs (non-accounted), thus revealing the true value of IAs that is available to the companies of Lithuania. It names a value of general IAs. The results of the research confirmed the IA valuation methodology, which allows companies to calculate the fair value of an IA. The obtained extended IAs valuation information may be valuable to both the owners of the company and investors, as this value plays an important practical role in assessing the impact of IAs on the market value of companies.

scholarly journals Valuing An Emerging International Technology Company

2011 ◽  
Vol 7 (1) ◽  
Author(s):  
John Zimmerman
Keyword(s):  
Balance Sheet ◽  
Cumulative Effect ◽  
Fair Value ◽  
Financial Accounting ◽  
Publicly Traded ◽  
Accounting Standard ◽  
Financial Valuation ◽  
Accounting Principle ◽  
Fair Valuation ◽  
Interim Period

The requirements of Financial Accounting Standard Board (FASB) 142 provide an excellent opportunity to examine various financial valuation methods used to determine a company’s value.  Under FASB 142, goodwill and intangible assets with indefinite useful lives are no longer amortized, but instead tested for impairment at least annually in accordance with the provisions. Any impairment loss has to be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in an organization’s first interim period. The impairment test requires an accurate and fair valuation of the asset in question.  This case is based upon the valuation dilemma faced by Integrated Silicon Solution (NASDAQ: ISSI), a publicly traded international technology company, in late 2008. ISSI had made several acquisitions and carried substantial goodwill. Since ISSI was publicly traded, a public market value was available but the financial crisis of 2008 caused the company to consider other methods, as is allowed under FASB 142. The case uses both the income and comparable market approaches to arrive at a fair value, and this value is used to determine if impairment for the goodwill the company carried on its balance sheet existed.

scholarly journals MENGUPAS PERSOALAN STANDAR AKUNTANSI KEUANGAN - GOODWIL DI BERBAGAI NEGARA : SUATU PENDEKATAN STUDI LITERATUR

2017 ◽  
Vol 2 (2) ◽  
Author(s):  
Deddy Kurniawansyah
Keyword(s):  
Research Method ◽  
Intangible Assets ◽  
Accounting Standards ◽  
Financial Statements ◽  
Fair Value ◽  
Financial Accounting ◽  
International Accounting Standards ◽  
Fair Value Accounting ◽  
Literature Study ◽  
Accounting Standard

This literature study explains and describe the development of the concept of goodwill from the perspective of accounting by observing and describing until the development at this time, discusses differences in accounting standards of goodwill applicable in some countries, and explains the things that contradict the goodwill. This research method used qualitative with literature study. The results of this study are in some countries, the concepts and rules on goodwill accounting have undergone various changes, including international accounting standards issued by the IASC. Initially goodwill is capitalized and amortized over no more than 20 years. But, along with the increasing use of fair value accounting in accounting standards, thetreatment for goodwill also experienced a shift that is eliminated by the amortization method is replaced by doing impairment test to goodwill. The results of this study contribute as add to the treasury of financial accounting literature, especially accounting treatment of goodwill as intangible assets in the financial statements of various countries such as Indonesia, America and the England.Keyword :Goodwiil, Impairment, Financial Accounting Standard

Impairment reversals: unbiased reporting or earnings management

2018 ◽  
Vol 26 (2) ◽  
pp. 245-271 ◽  
Author(s):  
Tongyu Cao ◽  
Hasnah Shaari ◽  
Ray Donnelly
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Reporting Standard ◽  
Accounting Standard ◽  
Content Type ◽  
Study Support ◽  
A Company

Purpose This paper aims to provide evidence that will inform the convergence debate regarding accounting standards. The authors assess the ability of impairment reversals allowed under International Accounting Standard 36 but disallowed by the Financial Accounting Standards Board to provide useful information about a company. Design/methodology/approach The authors use a sample of 182 Malaysian firms that reversed impairment charges and a matched sample of firms which chose not to reverse their impairments. Further analysis examines if reversing an impairment charge is associated with motivations for and evidence of earnings management. Findings The authors find no evidence that the reversal of an impairment charge marks a company out as managing contemporaneous earnings. However, they document evidence that firms with high levels of abnormal accruals and weak corporate governance avoid earnings decline by reversing previously recognized impairments. In addition, companies that have engaged in big baths as evidenced by high accumulated impairment balances and prior changes in top management, use impairment reversals to avoid earnings declines. Research limitations/implications The results of this study support both the informative and opportunistic hypotheses of impairment reversal reporting using Financial Reporting Standard 136. Practical implications The results also demonstrate how companies that use impairment reversals opportunistically can be identified. Originality/value The results support IASB’s approach to the reversal of impairments. They also provide novel evidence as to how companies exploit a cookie-jar reserve created by a prior big bath opportunistically.

The Impact of IFRS 2 "Share-Based Payment" on Malaysian Companies

2010 ◽  
Vol 13 (03) ◽  
pp. 449-468 ◽  
Author(s):  
Ruhaya Atan ◽  
Nur Syuhada Jasni ◽  
Yousef Shahwan
Keyword(s):  
Stock Options ◽  
Negative Relationship ◽  
Fair Value ◽  
Employee Stock Options ◽  
Accounting Standard ◽  
Corporate Scandals ◽  
Black Scholes ◽  
Compensation Plan ◽  
The Impact ◽  
International Accounting Standard

In the wake of corporate scandals and excessive stock options compensation, International Accounting Standard Board (IASB) has introduced a new accounting standard, IIFRS 2 Share-based Payments. The scope of the standard extends beyond payments to employees, but for the purpose of this study, the focus is only on 'employee stock options'. IIFRS 2 requires a fair value of stock options records calculated on grant date, and recognized as compensation expenses over vesting periods. Prior to the introduction of IIFRS 2, stock options were not recognized and were only disclosed in the notes to the accounts. In Malaysia, the standard is mandatory for all companies listed on or after January 1, 2006. This study assumes the requirement existed in 2003. This study examines the impact of stock options expenses from 2003 to 2005, on the top 100 Malaysian companies. The three year observations show at least 24% of the sample exceeds the 5% materiality threshold on diluted EPS. The sectors that are impacted the most are the Trade/Service and Finance sectors. From the multiple-regression test, this study finds that fair value of stock options have a negative relationship with dividend yields (input of the Black-Scholes Merton (BSM) Model). Most companies in the sample are found to pay dividends and grant stock options at the same time. Therefore, this study suggests that companies need to restructure their compensation plan thus balancing the stock options granted and dividends paid in the future.

Sign in / Sign up

Export Citation Format

Share Document