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1、7AccountingandTaxFactorsinMergersandAcquisitionsKENNETHR.FERRISANDPHILIPDRAKECHAPTEROBJECTIVESHighlightstheapproachesforaccountingformergersHighlightsglobalmergerandacquisitionreportingpracticesHighlightsthetaxationissuesinmergersandacquisitionsTwoessentialcompon
2、entsofeverycorporaterestructuringtransactionare:(a)themethodofaccountingimposedonthetransactionbylocalprofessionalorgovernmentalregulatorsand(b)thetaxationimplicationscreatedbythetransaction.Whilegreatertransparencyanduniformityintheaccountingtreatmentofsimilartr
3、ansactionshavebeenachievedinrecentyearsthroughouttheworld,mergerandacquisitiontaxlawsremainobtuseandareoftenhighlyculturally-dependent,varyingwidelyacrossnationalborders.Thischapterattemptstooverviewthedominantaccountingapproachestoandtaxconsequencesofvariousform
4、sofcorporaterestructuringsuchasmergersandacquisitions.AccountingforMergersandAcquisitionsGenerallyspeaking,whenacompanyobtainsamajorityownershipoftheoutstandingvotingsharesofanotherentity,itisusuallytheAccountingandTaxFactorsinMergersandAcquisitions161casethatthe
5、acquirerwillberequiredtoreflectthefinancialresults(thatis,thebalancesheet,incomestatementandstatementofcashflows)oftheacquiredentityonaconsolidatedbasiswiththeparentcompanyandanyothercompaniescontrolledbytheparent.Thepreparationofconsolidatedfinancialresults,itshould
6、benoted,hasbeenstandardizedinmanycountriestohelpavoidtheproblemofinformationoverloadbyinvestors.Imaginethedifficulty,forinstance,ofanalyzingthenumerousindividualcompany-levelfinancialstatementsofsuchconglomeratesasGeneralElectricintheUS,MitsuiinJapanorRelianceIndus
7、triesinIndia.Thepreparationofconsolidatedfinancialstatementsalsoprovidescertaincostsavingstoaparentcompanybymakingitpossibletoissueonesetofconsolidateddata,ratherthanaplethoraofindividualfinancialstatements.Thereis,however,adownsidetothepresentationofconsolidatedfin
8、ancialstatements,namelythatconsolidateddataissohighlyaggregatedthatitisoftendifficulttoassesshowindividualbusinesssegmentsareactuallyperforming.Itisnoteworthy,h