4259365
Description
Flashcards by Sarah Nicole Bog, updated more than 1 year ago
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Created by Sarah Nicole Bog
over 8 years ago
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| Question | Answer |
| Qualities of USA business environment | dynamic, ever changing REGULATORS ARE SEC, FASB, PCAOB |
| consolidated financial statements | presents 2 related companies or more as if they were one |
| Why have a complex business structure? | help achieve firm goals reduce risk increase profitability tax benefits by doing activities through subsidiaries |
| Merger Boom 1960s | conglomerates of different industries failed to have coherence |
| 1980s Consolidations | leveraged buyouts by issuing debt to purchase controlling interest created a lot of debt that haunts companies through today |
| 1990s | private equity money (investors pooled their $) was used to acquire new companies companies changed hands a lot |
| ethical concerns | manipulation of reporting to enhance manager's reports special-purpose entities used for only 1 purpose (tax evasion) assign purchase price to R&D-expensing it |
| ways to expand business | new product development expansion of existing product line acquire companies |
| subsidiary | means of disposing existing operations through sale or transfer of ownership |
| spinoff | ownership distributed to parent's stockholders |
| splitoff | subsidiary shares exchanged for shares of the parent company reduces parent shares outstanding |
| business combination | acquirer obtains ol |
| control | ability to direct policies and management |
| merger | combined together two companies with no discernible controlling company |
| controlling ownership | separate legal entity |
| noncontrolling entity | record investment on statements |
| primary beneficiary | expected to receive majority of profits & losses |
| purchase method | difference between purchase price and fair value of net assets is goodwill |
| pooling of interests method | no change in owner no change in valuation |
| ONLY ACCEPTABLE: acquisition method | fair value of consideration given in the combination and fair value of any noncontrolling interest |
| statutory merger | one of the combining survives and the other loses its identity acquired co is dissolved/liquidated |
| statutory consolidation | both companies are dissolved |
| stock acquisition | acquires voting shares |
| parent-subsidiary relationship | one company owns another |
| friendly acquisition | exchange of assets or voting shares |
| hostile takeover | tender offer to large shareholder |
| tender offer | exchange shares for security or assets for acquiring company |
| acquisition of assets | direct negotiation with management assure other company's liabilities distribute stock from other company to acquiring company's stockholders |
| What amount of stock is controlling? | greater than 50% |
| What other way can a company have control of another? | agreement |
| How do you value a firm when acquired? | Assets- valuation/appraisal Current Liabilities- book value Long-term Liabilities- current interest rate NOTE: grouped assets have greater value |
| present value of company | present value of future cash flows |
| acquisition accounting | recognizes all assets and liabilities assumed in a business combination and measures them at fair values noncontrolling also measured at fair value acquirer and acquisition date must be established indirect costs charged to acquisition expense |
| ASC 805 | value of consideration |
| ASC 820 | how to apply fair value in accounting |
| goodwill | asset representing future economic benefit arising from other assets acquired and not recognized |
| FASB Goodwill | 1. fair value of consideration given by acquirer 2. fair value any interest in acquiree that acquirer already held 3. fair value of noncontrolling interest 4. sum of 1-3 compared with acquisition date's fair value of net identifiable assets EXCESS IS GOODWILL |
| differential | difference between fair value of consideration exchanged and book value of net identifiable assets |
| bargain purchase | gain for excess of net identifiable assets & liabilities at fair value, over sum fair value considered, & fair value equity interest, and fair value of noncontrolling |
| measurement period | amount of time allowed (ASC 805) to acquire information for journal entries NOTE: JE's are restrospectively adjusted |
| contingent consideration | certain number of additional shares by % earnings that exceed set amount over 5 years classified as liability or equity liability remeasured each period to fair value and change in income *not remeasured in equity |
| acquiree contingencies | loan guarantees, etc recognized as asset or liability at fair value |
| Is ongoing R&D an asset? | it is unless, it's abandoned. no amortization is recognized until the R&D is complete or abandoned |
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