Click here to download

Acquisition-type or merger-type accounting? Further insights on transactions involving businesses governed by the same party(-ies)
Journal Title: FINANCIAL REPORTING 
Author/s: Tiziano Onesti, Mario Romano, Marco Taliento 
Year:  2015 Issue: Language: Italian 
Pages:  21 Pg. 117-137 FullText PDF:  250 KB
DOI:  10.3280/FR2015-002005
(DOI is like a bar code for intellectual property: to have more infomation:  clicca qui   and here 


This paper - aiming at encouraging a fruitful debate - intends to highlight the discontinuous evolution of the accounting solutions explored by notable bodies (Efrag-Oic, Iasb, Fasb, Kasb, etc.) with reference to transactions involving businesses under common control. The work finally recompose them in two basic categories (discussing their pros/cons as well), here analyzed: acquisition-type accounting, which emphasizes fair value (emergence of exchange or current amounts) vs. merger-type accounting, linked to historical costs (continuity values approach). The first cluster includes the pure-acquisition and the fresh-start method, whereas the second the predecessor basis and the pooling of interests techniques. The concrete identification of the proper methodology, in this regard, essentially requires the profound understanding of the underlying economics, architecture and key elements of a specific transaction shedding light on the most relevant and reliable information useful to stakeholders.
Keywords: Common control, consolidation, financial reporting, acquisition accounting, fresh start, predecessor basis, pooling of interests, IAS/IFRS

  1. AcSB-CNC (2015). Business Combinations Under Common Control, Toronto, Ontario.
  2. AICPA (1970-1973). Accounting Interpretation 27: “Entities under Common Control in a Business Combination”. (New York).
  3. AICPA (1970-1973). Accounting Interpretation 39: “Transfers and Exchanges between Companies under Common Control”. (New York).
  4. Amaduzzi, A. (1953). L’Azienda, nel suo sistema e nell’ordine delle sue rilevazioni. (Torino: Utet).
  5. Anthony N.R. (1983). Tell it like it was: a conceptual framework for financial accounting. (Chicago: Richard D. Irwin).
  6. Benston G.J., Bromwich M. and Wagenhofer A. (2006). Principles-Versus Rules-Based Accounting Standards: The FASB’s Standard Setting Strategy. Abacus, 42 (2),, 10.1111/j.1467-6281.2006.00196.xDOI: 10.1111/j.1467-6281.2006.00196.x
  7. Biancone P.P. (2013). Business Combinations Under Common Control (BCUCC): the Italian Experience. GSTF Business Review, March, 2 (3).
  8. Biondi Y. (2010), Should Merger Accounting Be Reconsidered? Proceedings of the 7th International Accounting Conference (AACF), MODAV 2010, October 14-15, Istanbul.
  9. Bonacchi M., Marra A. and Shalev R. (2015). Fair Value Accounting and Firm Indebtedness – Evidence from Business Combinations Under Common Control, March, available at SSRN: http://ssrn.com/abstract=2587270.
  10. CASC (2006). Report of Activities – 2006 China Japan Korea Accounting Standard Setters Meeting, 30-31 August, Seoul.
  11. Chandler A. (1997), The Visible Hand: the Managerial Revolution in American Business. (Cambridge, Mass.: Belknap Press).
  12. Coase R.H. (1988). The Firm, the Market and the State. (Chicago, University of Chicago Press).
  13. Conner K.R. and Prahalad C.K. (1996), A Resource-based Theory of the Firm: Knowledge vs. Opportunism, Organization Science, 7,, 10.1287/orsc.7.5.477DOI: 10.1287/orsc.7.5.477
  14. Deloitte (2010). A roadmap to Accounting for Business Combinations and Related Topics. (London: LLP).
  15. EFRAG (2009). The Needs of Users of Financial Information – A User Survey. (Brussels).
  16. EFRAG-OIC (2011), Discussion Paper – Accounting for Business Combinations Under Common Control. (Brussels).
  17. EFRAG-OIC (2012), Feedback Statement – Accounting for Business Combinations Under Common Control. (Brussels).
  18. Eigen, M.M. (1965), Is Pooling Really Necessary?, The Accounting Review, 40 (3).
  19. Epstein B.J. and Jermakowicz E.K. (2011), Interpretation and Application of International Accounting and Financial Reporting Standards. (New York: John Wiley & Sons).
  20. Ernst & Young (2010), International GAAP 2010. (London: John Wiley).
  21. FASB (2007). Statement of Financial Accounting Standards (SFAS) 141 Business Combinations. (Norwalk).
  22. FASB (2007), Accounting Standards Codification Topic 805 Business Combinations. (Norwalk).
  23. Foss N.J. and Klein P.G. (2005), The Theory of the Firm and Its Critics: A Stocktaking and Assessment. Druid WP, 05-03,, 10.2139/ssrn.695484DOI: 10.2139/ssrn.695484
  24. Franco A. (2006), Le operazioni di riorganizzazione infragruppo: profili contabili alla luce dei principi contabili internazionali, Rivista dei Dottori Commercialisti, 1.
  25. G4 + 1 (1999), Methods of Accounting for Business Combinations: Recommendations of the G4+1 for achieving Convergence. (Toronto: G4 + 1).
  26. Hong Kong Institute of CPA (2008), Merger Accounting for Common Control Combinations. (Hong Kong).
  27. IASC (1998), G4+1 Position Paper: recommendations for achieving convergence on the methods of accounting for business combinations. (London).
  28. IASB (2003), IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. (London).
  29. IASB (2008), IFRS 3 – Business Combinations. (London).
  30. KPMG (2010), Insights into IFRS. (London: Thomson).
  31. KASB (2012), Transactions under Common Control. Fourth IASB Emerging Economies Group meeting, December, Sao Paulo, Brazil.
  32. Madhok A. (1996), The Organization of Economic Activity: Transaction Costs, Firm Capabilities, and the Nature of Governance, Organization Science, 7,, 10.1287/orsc.7.5.577DOI: 10.1287/orsc.7.5.577
  33. Muller V.O. (2011), Academic research on group accounting over the past fifty years, International Academy of Business and Economics Audience, 11 (1).
  34. Nelson R. and Winter S. (1985), An Evolutionary Theory of the Economic Change. (Cambridge, MA-London: Belknap Press).
  35. Nobes C. and Parker R. (2008), Comparative International Accounting. (Boston: Prentice Hall).
  36. OIC (2007), OIC n. 4 – Fusione e Scissione. (Rome).
  37. Onesti T., Romano M. and Taliento M. (2015), Business combinations under common control. Concerns, criticisms, strides. Financial Reporting, 1.
  38. Phillips L.C. (1965), Accounting for Business Combinations, Accounting Review, April, 40 (2).
  39. PWC (2010), The IFRS Manual of Accounting. (London: CCH).
  40. Ramanna K. (2008), The implications of unverifiable fair-value accounting: Evidence from the political economy of goodwill accounting, Journal of Accounting and Economics, 45,, 10.1016/j.jacceco.2007.11.006DOI: 10.1016/j.jacceco.2007.11.006
  41. Vv.Aa. (2005), Applying International Accounting Standards. (Milton: Wiley).
  42. Wells M. (2011), Framework-based teaching of principle-based standards, Accounting Education: An International Journal, 20 (4).
  43. Williamson O.E. (1989), Transaction Cost Economics, Handbook of Industrial Organization, I,, 10.1016/S1573-448X(89)01006-XDOI: 10.1016/S1573-448X(89)01006-X
  44. Zappa G. (1957), Le produzioni nell’economia delle imprese. (Milano: Giuffrè).

Tiziano Onesti, Mario Romano, Marco Taliento, in "FINANCIAL REPORTING" 2/2015, pp. 117-137, DOI:10.3280/FR2015-002005

   

FrancoAngeli is a member of Publishers International Linking Association a not for profit orgasnization wich runs the CrossRef service, enabing links to and from online scholarly content