Accounting for Mergers and Acquisitions
Accounting for business restructuring is an essential step in assessing the financial viability of the proposed changes. In the United States, financial statements relating to any mergers or acquisitions must receive the approval of Securities and Exchange Commission before a permit is issued to investors. In this chapter, we will discuss the purchase accounting method, currently the only method in use, for merger and acquisition (M&A) accounting.
Accounting Methods for M&A
Two accounting methods for M&As existed until January 2001. These methods are the pooling-of-interest method and the purchase method. The pooling-of-interest method requires the original “historical cost” of the assets and ...
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