Accountants' Handbook, Volume One, Financial Accounting and General Topics, 12th Edition

Chapter 8

Accounting for Business Combinations

James Mraz, CPA, MBA

Professor of Accounting

University of Maryland: University College

8.1 Background

8.2 Scope

(a) Identifying a Business Combination

8.3 Acquisition Method of Accounting

(a) Identifying the Acquiring Company

(i) Reverse Acquisitions

(ii) Measuring the Consideration Transferred in a Reverse Acquisition

(b) Determining the Cost of the Acquired Equity

(i) Fair Value of Consideration Given

(ii) Calculating the Fair Value of the Consideration Transferred

(iii) Stock Options of the Acquiree

(iv) Stock Options of the Acquirer

(v) Fair Value of the Acquired Company

(vi) Determining the Acquisition Date

(c) Direct Costs of the Business Combination

(i) Acquisition Costs Incurred by the Acquiree

(ii) Plant Closing Costs and Employee Severance Costs

(iii) Payments to Employees: Acquisition Cost versus Employee Compensation Arrangements

(iv) Discretionary Costs in Purchase Business Combinations

(d) Contingent Consideration

(i) Contingencies Based on Earnings

(ii) Contingencies Based on Security Prices

(iii) Earnings per Share Consequences of Contingent Share Arrangements

(iv) Adjustment of Acquisition Cost or Compensation Expense?

(e) Acquisition of Minority Interests

(i) Exchange of Ownership Interests Between Entities under Common Control

(ii) Accounting for Simultaneous Common Control Mergers

(f) Identifying Assets Acquired and Liabilities Assumed

(i) Marketing-Related Intangible Assets

(ii) Customer-Related Intangible Assets ...