Financial Reporting:

Business Combinations

 

How Should Mergers and Acquisitions be Reported in the Financial Statements?

Position: All acquisitions and mergers should be reported using the purchase method

Rationale:

• The purchase method requires that all assets acquired must be recorded at fair value in the balance sheet

• The fair values should be measured at the date control of the assets passes to the acquirer and should be based on market values for identical or similar assets

• Similarly, the method requires that all consideration (including debt, equity, and contingent payments) given to acquire the assets, should be reported in the balance sheet at fair values