Chapter 1

Frage	Antworten
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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	Erstellt von Sarah Nicole Bog vor fast 9 Jahre