Merger & Acquisition Accounting

Merger & AcquisitionAccounting

A. Faisal Sultan

Accounting Type

I. By Pooling of Interests (Metode Penyatuan Kepentingan)A method of accounting that allows the balance sheets of two companies to be added together during an acquisition or merger. Pooling of interest allows for assets to be evaluated by book value rather than market value

II. By Purchase(Metode Pembelian) The purchase method in which the purchasing company adds the absorbed company's assets to its fair market value.One of the important differences between the two methods is that pooling of interests allows for assets to be evaluated by book value rather than market value. This allows them the option to work without adding in goodwill, an intangible value that a business earns through reputational factors like customer relationships and brand recognition.

Matrix

Accounting Example

Perusahaan PT D, PT E dan PT F, sepakat bergabung Mendirikan perusahaan baru PT DEF, untuk kepentingan tersebut, aktiva perusahaan dinilai kembali dengan hasil PT D tetap 1.000.000,- PT. E dinaikkan menjadi Rp7.000.000,- dan PT F menjadi Rp550.000,-.Atas aktiva dan kewajiban yang diambil alih PT DEF mengeluarkan 1 lembar saham biasa untuk setiap RP25.00 aktiva bersih sesudah penialaian diambil alih.

(Rp)

Asset 1,000,000.00 625,000.00 500,000.00 2,125,000.00 Utang 375,000.00 200,000.00 175,000.00 750,000.00 Modal Saham 500,000.00 250,000.00 250,000.00 1,000,000.00 Agio Saham 175,000.00 75,000.00 50,000.00 300,000.00 Laba ditahan (defisit) (50,000.00) 100,000.00 25,000.00 75,000.00 Total Liability 1,000,000.00 625,000.00 500,000.00 2,125,000.00

PT D PT E PT F Jumlah

Question

1. Jumlah lembar saham yang dikeluarkan PT.DEF?2. Buatlah jurnal pada pembukuan PT DEF dengan

metode Pooling of Interest atau Purchase ?a. Saham tanpa nominalb. Nominal Saham Rp30.00 per lembarc. Nominal Saham Rp25.00 per lembard. Nominal Saham Rp20.00 per lembare. Nominal Saham Rp.15.00 per lembar

Answer

Jumlah lembar saham biasa yang diterbitkan

(Rp)

Utang 375,000.00 200,000.00 175,000.00 750,000.00

lembar

Aktiva bersih Setelah Penilaian 625,000.00 500,000.00 375,000.00 1,500,000.00

Jumlah saham yang dikeluarkan 25,000.00 20,000.00 15,000.00 60,000.00

PT D PT E PT F Jumlah

Aktiva setelah penilaian kembali 1,000,000.00 700,000.00 550,000.00 2,250,000.00

Effects on Net Income

When purchase price exceeds the book net worth of target, accounting net income of the combined firm will be lower under purchase accounting than under poolingWhen the excess is assigned to depreciable assets, the depreciation expense item will be increased

When the excess is assigned to goodwill, the annual amortization of goodwill will be increased whether tax deductible or not

Effects on Cash Flows

If the excess is assigned to nontax deductible goodwill, cash flows are unaffectedWhen the excess is assigned to depreciable assets, cash flows under purchase accounting will be increased by the amount of depreciation tax shelter

When the excess is assigned to goodwill whose amortization is deductible under the tax law change of 1993, cash flows under purchase accounting will be increased

Effects on Leverage

Pooling — leverage is unchangedPurchase– When payment is by stock, leverage is decreased– When payment is from excess cash or increased

debt, leverage is increased

See the text and diskette for use with Weston, Johnson, Siu (2000) for Tables 3.1 through 3.6 for analysis of above relationships

Empirical Studies

Acquiring firms prefer pooling method to avoid negative impact of goodwill amortization on reported earningsStock prices of acquiring firms are not penalized when purchase method accounting is usedNo statistical significant difference in stock price reactions to accounting method used in nontaxable transactions

FASB Proposal to Eliminate Pooling

Effective late 2000 or early 2001Reasons to eliminate pooling– Provides less information– Ignores the values exchanged– Financial statements do not provide enough information

on the transaction– Difficult to compare companies– Artificially boosts earnings– Transaction should be recorded based on value that is

given up in exchange