scholarly journals Business Combinations under Common Control: The Gain/loss Group Perspective. What the IASB Project Leaves Unaddressed

2021 ◽  
Vol 16 (11) ◽  
pp. 59
Author(s):  
Francesco Bellandi

Although BCUCCs are widespread, a clear treatment is missing under IFRS. Most contributions have taken partial views. This article innovatively provides a systematic theoretical apparatus of the role accounting plays for all the affected members of a group, with a focus on gain or loss opportunities below the consolidated statements. The method used is international technical accounting analysis under IFRS and U.S. GAAP. It shows how a BCUCC may be driven to achieve gain/loss in separate financial statements and how cross-company consistency in policies and substance may reveal gain/loss arbitrage; the interaction of principles for disposals, demergers, and business combinations; and the position of sub-holdings, which in real practice is more relevant than the ultimate parent company. This paper is timely, as the IASB has recently published a Discussion Paper. The IASB project fails to give answers to these points as it only looks at the receiving entity and consolidated statements.

Author(s):  
Alin Eliodor Tănase ◽  
Traian Ovidiu Calotă ◽  
Gabriela Claudia Oncioiu

The presence of several legal entities within the same group entails the existence of as many independent accountants as there are companies. In accordance with IFRS 3 “business combinations,” the result is goodwill that will be recognized as a non-current intangible asset in the consolidated balance sheet, being subjected annually to the impairment test; insofar as the investment cost is lower than the acquisition cost of the net assets, the negative goodwill will be obtained which will be recognized in the form a profit in the consolidated profit and loss account. In addition, national differences in accounting, taxation, and auditing are the sources of the various problems that arise in the process of controlling subsidiaries and consolidating accounts. This chapter aims to study the convergence and divergence regarding business combinations in the joint business as well as to analyze the managerial controversies that are presented in the conversion of the financial statements.


Author(s):  
Marc L. Lipson

After having negotiated major financial and operating decisions with its parent company, the CFO of this small ready-mix concrete subsidiary is asked to provide a valuation of the subsidiary. A one-year forecast of financial statements is provided along with information on long-term operating expectations and capital costs. This otherwise straightforward valuation exercise is enhanced by (1) the need to select between the parent- or comparable-firm costs of capital, (2) sufficient guidance to perform an illuminating sensitivity analysis, and (3) a sufficiently clear and rich context in which to illustrate the linkages between operating and financing choices. A teaching note and instructor and student Excel spreadsheets are available.


2007 ◽  
Vol 22 (2) ◽  
pp. 255-284
Author(s):  
Hugo Nurnberg ◽  
Jan Sweeney

In explaining Statement No. 141, Business Combinations (SFAS No. 141, FASB 2001b) and Statement No. 142, Goodwill and Other Intangible Assets (SFAS No. 142, FASB 2001c), accounting textbooks do not adequately describe the theoretical choices the FASB considered or the economic and political context in which the FASB developed these statements. This instructional resource fills that gap. It compares purchase, pooling of interests (hereafter, pooling), and fresh start accounting, as well as various methods of accounting for goodwill under purchase and fresh start accounting; it also discusses the economic and political context in which the FASB deliberated. A simple example (and a separate more complicated homework problem) compares the effects of these methods on post-combination financial statements. The Teaching Notes discuss how to use this instructional resource to introduce these subjects and integrate them with other subjects covered in advanced financial accounting and merger and acquisition courses.


Author(s):  
Jana Gláserová

This paper is focused on the operations with the company (business combinations). These are those operations that are associated with the formation or dissolution of companies or reorganization of their ownership structure. They are often referred as equity transactions. In the concept of Czech accounting legislation, these are the purchase, sale, investment (deposit) of firms or their parts, and various forms of transformation of enterprises. There are analyzed the accounting practices of recording of these issues under the Czech accounting legislation and International Financial Reporting Standards. Consequently there are identified newly acquired assets and liabilities arising directly in connection with the business combinations. In the conclusion of this paper there are examined the effects of different reporting of newly acquired items in the context of business combinations according to Czech accounting legislation and in accordance with International Financial Reporting Standards on the significant items of balance sheet and profit and loss statement from the material and time point of view.


2015 ◽  
Vol 12 (2) ◽  
pp. 293-302 ◽  
Author(s):  
Francesco Sotti ◽  
Luigi Rinaldi ◽  
Giovanna Gavana

This paper aims at emphasizing some drawbacks arising from the alternatives consolidation approaches allowed by the IFRS 3 revised 2008. We develop our analysis working on simulated figures to demonstrate that subsidiaries with similar underlying economics might have a different impact on the calculation of the group equity and income. That is merely due to the accounting treatment chosen by the parent company. This fact does not respect the consistency among values within consolidated financial statements and causes lack of comparability among consolidated financial statements prepared by different reporting entities. Since nowadays there is not any Standard requiring disclosure suitable for the comprehension of this matter, we suggest which relevant disclosure should be provided to better understand the composition of the group results


2015 ◽  
pp. 107-126 ◽  
Author(s):  
Raffaele Fiume ◽  
Tiziano Onesti ◽  
Mauro Romano ◽  
Marco Taliento

Although excluded from the scope of IFRS 3, business combinations under common control (BCUCCs) are widespread transactions that take place all over the world in different forms, often as a reorganization or restructuring among related parties. These transactions occur when entities are ultimately - not transiently - controlled by the same party/ies before and after the combination (which is neither a capital market nor an arm's length transaction and devoid of economic substance: indeed, no change of control is entailed). The scarce and fragmentary literature, not to mention the lack of clear consensus on the topic, contributes to the prevailing concerns on how to account for BCUCCs. In this complex context, the purpose of this work is to assess the possible and various accounting methods and identify the most suitable, accredited and consistent techniques.


Sign in / Sign up

Export Citation Format

Share Document