Accounting for Mergers & Acquisitions

New York Institute of Finance

How long?

  • 1 day
  • in person, online

What are the topics?

New York Institute of Finance

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Who should attend

Financial analysts/managers, strategic planning professionals, corporate finance lawyers, accountants and market regulators

About the course

Learn how to apply accounting and federal income tax principles to project earnings and cash flows, specifically of the post-combination entity.

This course is a component of the M&A Professional Certificate

Prerequisite knowledge:

  • Solid understanding of financial accounting and of mergers and acquisitions concepts and structures.

CURRICULUM

Day 1

MODULE 1: EQUITY METHOD OF CONSOLIDATION

  • Determining the appropriate tax rate for equity method investments
  • Differed tax items recognized for equity method investments
  • Phantom depreciation and goodwill
  • Effects of intercompany transactions
  • SEC views and guidelines for applying the equity method
  • Purchase Accounting for Business Combinations

MODULE 2: PURCHASE ACCOUNTING BASICS-CONCEPTS OF FAIR VALUE AND GOODWILL

  • Calculating net identifiable assets-write-ups, write-downs, and deferred taxes
  • Adjustment of LIFO inventories to reflect fair value
  • Estimating the write-up to intangible assets from recognizing the target's self-created assets
  • Transaction and market impacts on the valuation of long-term liabilities
  • Calculating the purchase price, goodwill, and the treatment of transaction fees
  • How to treat negative goodwill, how it is allocated and when it results in an extraordinary gain

MODULE 3: FORECASTING THE PERFORMANCE OF THE COMBINED COMPANY

  • Analytic objectives-impact of earnings accretion and dilution on equity value; analysis of cash flows for debt service
  • How the combined company's form influences the approach to forecasting-mergers versus acquisitions
  • Forecasting synergies-common omissions that overstate operating results
  • Cash flow effects from net operating loss limits

MODULE 4: INTERNAL REVENUE CODE SECTION 338(G) AND 338(H)(10) TRANSACTIONS

  • Concept of inside and outside basis as it applies to deemed asset sales transactions
  • Calculating the Aggregate Deemed Sales Price
  • Calculating the Adjusted Grossed-Up Basis
  • Analyzing the transaction costs and benefits

WHAT YOU'LL LEARN

  • Describe the equity method of consolidation
  • Account for equity method investments
  • Explain the tax considerations for equity method investments
  • Describe the impact of phantom goodwill or phantom depreciation
  • State the effect of not eliminating intercompany transactions
  • State the requirements for applying the equity method
  • Describe the fundamental concepts for accounting for business combinations using the purchase model
  • Determine a targets' net identifiable assets by adjusting for existing goodwill, long-term asset write-ups and write-downs, LIFO inventories, deferred tax items, and fees
  • Determine how net operating loss limitations may impact the combined company's future cash flows
  • Calculate the acquisition purchase price and transaction goodwill
  • Account for negative goodwill by allocation and recognition of extraordinary gains
  • Estimate the impact of target's unrecognized intangible assets on goodwill and the combined company's future earnings
  • Calculate the accretion and dilution of future earnings resulting from business combinations
  • Explain the mechanism of an IRC 338(g) transaction
  • Describe the conditions that make a 338(g) transaction economically feasible
  • Explain the mechanism of an IRC 338(h)(10) transaction
  • Describe the conditions that make a 338(h)(10) transaction economically feasible
  • Explain how the Aggregate Deemed Sales Price and Adjusted Grossed-Up Basis are determined
  • Determine the Seller's and Buyer's ranges of indifference

Accounting for Mergers & Acquisitions at New York Institute of Finance

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