Financial Intelligence helps corporations navigate SFAS 141, 141R and SFAS 160 standards and make purchase price allocation and segment reporting decisions

M&A / Purchase Accounting

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Statement of Financial Accounting Standards (SFAS) 141 (Business Combinations) requires the use of purchase accounting for mergers and acquisitions. Commencing in 2009, SFAS 141R also requires the use of fair value accounting for these transactions. Because the fair values must be based on market participant assumptions rather than on company-specific assumptions, these new rules will dramatically increase the risk and complexity of accounting for an acquisition. They may also dramatically increase the volatility of future operating metrics due to increased amortization, depreciation, or future impairment charges.

Financial Intelligence's accounting and valuation experts help corporations navigate these new rules and make purchase price allocation and segment reporting decisions—from simple to extremely complex scenarios. Examples include:

  • Complex intangible assets with definite and indefinite lives
  • Contingent consideration
  • Deferred revenue
  • Variable interest entities (VIE)
  • Cross-border transactions
  • Differences between US GAAP and IFRS

Further complicating matters, SFAS 160 (Noncontrolling Interests in Consolidated Financial Statements) will change the accounting and reporting for minority interests, which will be re-characterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority-interest holders. Moreover, these changes will affect the financial statement presentation, key operating metrics, and financial ratios at the date of acquisition and in subsequent periods.

Corporations rely on Financial Intelligence for a complete solution when applying these new rules. We guide our clients through the accounting and valuation issues and prepare the necessary valuations thoroughly to ensure that they survive potential rigorous scrutiny from auditors and regulatory agencies—the first time. In each case, we work closely with management (and auditors and/or counsel when appropriate) to determine the proper accounting treatment. We also prepare position papers to document our conclusions thoroughly.

Beyond accounting theory and related position papers, we provide clients with detailed financial analyses to explain the impact of accounting and valuation decisions on both historical and prospective financial results.

Our proven experience in solving extremely complex and diverse revenue recognition issues allows us to resolve issues and form defensible conclusions; document conclusions to satisfy demanding audit situations; and draft disclosures and complete the SEC filings quickly.