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eu/Solution-Manual-for-Advanced-Accounting-4th-Edition-Jeter,-Chaney
II.
III.
The term pro forma is also frequently used, aside from mergers, to
indicate any calculations which are computed as if alternative rules or
standards had been applied. For example, a firm may disclose in its press
releases that earnings excluding certain one-time charges reflect a more
positive trend than the GAAP-reported EPS. However, the SEC has
recently cracked down on the extent to which these types of pro forma
calculations may be presented, and the details that should be included in
such announcements.
C.
IV.
B.
Assets acquired via issued shares are recorded at fair values of the stock
given or the assets received whichever is more clearly evident.
C.
D.
Goodwill (GW) is recorded as any excess of total cost over the sum of
amounts assigned to identifiable assets and liabilities and, under SFAS No.
142 [ASC 350] is no longer amortized.
E.
F.
G.
H.
I.
V.
LEVERAGED BUYOUTS
A.
Group of employees/management creates a new company to acquire all
the outstanding shares of employer/original company.
B.
Consensus position is that only portion of the net assets acquired with
borrowed funds have actually been purchased and therefore recorded at
cost.
Motivation for selling firm: structure the deal so that any gain resulting is
tax-free at the time of the combination.
Deferred tax liability (or asset) needs to be recognized by purchaser when
the book value of the assets is used (inherited) for tax purposes, but the
fair value is recognized in the accounting books under purchase
accounting rules.
2.
3.
4.
5.
6.
7.
8.
B.
Direct Expenses
Indirect Expense
Security Issue Costs
Pooling
Expense (IS)
Expense (IS)
Expense (IS)
Purchase
Capitalize (GW or PPE)
Expense
Adjust additional PIC
II.
3.
4.
III.
A.
B.
C.
D.
3.
4.
Results of operations for that period were the sum of the results of:
(1)
Operations of the separate companies as if they had been
combined from the beginning of the fiscal period to the
date the combination is consummated.
(2)
The combined operations from that date to the end of the
period.
Purchase accounting tends to report higher asset values but lower earnings
(due to excess depreciation and amortization) versus pooling of interest.
C.