The Financial Reporting Blog

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


24-Hour Impairment: Merck’s Drug Deal with Cubist

In a deal valued at approximately $9.5 billion ($8.4 million in cash and $1.1 in assumed debt), Merck’s acquisition of Cubist was originally expected to result in significant EPS gains by 2016. At least, that was the plan. Mere hours after Merck’s announcement, a U.S. court invalidated four of Cubist’s five key patents on Cubicin, the antibiotic responsible for 80% of the company’s revenue. The decision effectively allows generic production of Cubicin as early as June 2016, four and half years before the original patent expirations in November 2020.

FASB Releases Another Elective Exception to GAAP for Private Companies

Just before Christmas 2014, FASB issued Accounting Standards Update No. 2014-18, Accounting for Identifiable Intangible Assets in a Business Combination, a consensus of the Private Company Council (“ASU”). The ASU allows a private company (i.e. not a public or not-for-profit entity) to choose not to recognize two types of intangible assets separately from goodwill following a business combination: customer-related intangible assets that cannot be sold or licensed independently from other assets of a business, noncompetition agreements.

Credit spreads, not fed funds basis points, are the key for 2015

While rising rates should support higher net interest margins and EPS for a broad swath of commercial banks that have a sizable amount of non-interest bearing deposits and loans that reprice with 30-day LIBOR, we should focus on credit. If credit spreads are widening (or narrowing), NIM discussions, like much of what the Street chatters about, are just noise.

Top 7 Audit Risks for Year-End

As 2014 draws to a close, finance executives and auditors are preparing for year-end reporting and auditing. What areas will draw the most attention from auditors? And which types of transactions and estimates will attract additional scrutiny from the PCAOB? … Continued

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