The Financial Reporting Blog

A weekly update on financial reporting topics curated by Mercer Capital’s Financial Reporting Valuation professionals.


New Guidance on Valuing Customer Relationships

What are your customer relationships worth? One of the most common intangible assets identified in a business combination is customer relationships, which can include customer lists, order or production backlogs, and contractual or noncontractual customer relationships. Many factors can influence the value of these types of assets, including the type of underlying business, the typical “life” of the relationship between the customer and the firm, and the presence of other assets in the firm (tangible or intangible) that contribute to value.

Fair Value & Bankruptcy: Fresh-Start Accounting

Perhaps because most CFOs would rather not need to be familiar with the special accounting rules that apply in the event of bankruptcy, the standards regarding so-called “fresh-start” accounting receive relatively little attention. For management teams working through a bankruptcy, there are a number of valuation-related considerations.

2013 Mergers and IPOs: A Year of Growth and Opportunities

M&A and IPO activity in the U.S. ended on a high note in 2013. Merger volume picked up in the second half of the year as companies took advantage of a low interest rate environment. Greater competition for deals and rising valuations in the United States have led some private equity firms to seek returns through less expensive (and non-conventional) minority investments and partnerships rather than buyouts. With a strong finish to 2013, there is renewed optimism that the momentum achieved in M&A and the IPO markets will carry on into 2014.

What Exactly is a Private Company, Anyway?

On the heels of the FASB’s recent approval of certain GAAP exceptions for private companies, the FASB is re-evaluating the definition of a public company. This post summarizes the FASB proposed definition of a public company, as well as the CFA Institute’s comment letter on the topic issued October 28, 2013.

A Buyer’s Market: Accounting for Bargain Purchases

The volatility of the commercial banking industry during the financial crisis resulted in a number of banks recognizing bargain purchase gains as they acquired distressed banks. Indeed, as industries undergo cyclical changes and consolidation trends, the likelihood of strategic buyers recognizing a bargain purchase gain increases. Reviewing the methodologies and assumptions used in the initial purchase price allocation to value intangible assets and contingent liabilities is a crucial step in determining whether or not a transaction meets the criteria to be categorized as a bargain purchase.

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