The Financial Reporting Blog

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


Social Capital’s Backdoor Unicorn IPO

We have recently discussed the changing dynamics of the IPO market and startups’ shifting perspectives in regards to going public.  Public offerings haven’t all gone wrong this year, but latest rounds of unicorn IPO flops appear to have dampened some investors’ outlook on the traditional IPO route.  Nevertheless, unicorn investors still need liquidity and are turning to creative ways to get the IPO pipeline flowing again.

A New Framework and Credential for Financial Instrument Valuation

Global accounting standards increasingly call for financial measurements and disclosures that comply with a defined measurement objective, such as fair value.  Additionally, financial instruments are becoming increasingly complex in their terms, conditions, and structure.  As a result, the AICPA has announced the creation of a new Disclosure Framework for the Valuation of Financial Instruments (the “DF-FI”) and a new professional credential relating to financial instruments called the CVFI (Certified in Valuation of Financial Instruments).

What Is Your Name Worth as a Tradename?

Tradenames are valuable if customers associate the name with products or services that are of higher quality than alternate offerings. For the acquiring firm, such an association can lead to greater financial returns. However, a market participant acquirer will likely pay (up) for the privilege of continuing to use the founder’s name only if she expects the superior financial performances, as well as the signaling benefits, will be transferable.

$475 Million Bargain Purchase Leads to an SEC Settlement

Was it a bargain purchase or not? The SEC has reached a $6.2 million settlement with a Big 4 audit firm relating to auditing failures associated with Miller Energy Resources, an oil and gas company with activities in the Appalachian region of Tennessee and in Alaska. In late 2009, Miller acquired certain Alaskan oil and gas interests for an amount the company estimated at $4.5 million. The company subsequently assigned a value of $480 million to the acquired assets, resulting in a one-time after-tax bargain purchase gain of $277 million. Following the deal, the newly acquired assets comprised more than 95% of Miller’s total reported assets. This post will examine the particulars of the case and provide some observations on fair value accounting that can be gleaned from the SEC settlement order.

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