The Financial Reporting Blog

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

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.

FASB Endorses GAAP Exceptions for Private Companies

The FASB recently endorsed two GAAP exceptions for private companies. The first exception permits private companies to amortize goodwill and implements a simplified model for goodwill impairment testing. The second exception offers a practical expedient that allows private companies to qualify for hedge accounting under ASC Topic 815. Final standards for each are expected to be issued by the end of the year.

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