Description
As each new accounting question or scandal hits Wall Street, investment professionals too often find themselves asking, “What happened?” “Accounting for M&A, Equity, and CreditAnalysts” answers the most common accounting questions, all inan easy-to-follow format designed to provide investment professionalswith real-world, hands-on knowledge of key accountingtreatments, models, and practices. Written by well-knownM&A expert James E. Morris, this versatile accounting deskreference bridges the gap between what is taught in businessschool and what is needed in the real world. McGraw-Hill authors represent the leading experts in their fields and are dedicated to improving the lives, careers, and interests of readers worldwide Introduction List of Abbreviations Chapter 1 Equity Method of Consolidation Introduction Description of the Equity Method Tax Considerations When Using the Equity Method Accounting under the Equity Method-Excess of Cost over Equity Purchased Accounting under the Equity Method-Intercompany Transactions Guidance for Applying the Equity Method SEC Staff Views Concerning the Equity Method When to Use the Equity Method-Summary Accounting for Cash Flows from Equity Method Investments Modeling the Equity Method of Accounting in Projection Models Chapter Summary Chapter 2 Minority Interests Introduction Minority Interests Overview of Accounting for Minority Interests Treatment of Minority Interests for Enterprise Valuation Forecasting Minority Interests Treatment of Minority Interests in M&A Transactions Modeling Minority Interests Chapter Summary Chapter 3 Deferred Income Taxes and Income Tax Reporting Introduction Basic Principles of Tax Reporting The First Principle The Second Principle The Third Principle The Fourth Principle Treatment of Deferred Income Tax Items in M&A Transactions Modeling Income Taxes in Projection Models Calculating the Provision for Taxes-Detailed Calculation Chapter Summary Chapter 4 Deciphering the Deferred Tax Footnote Introduction Financial Statement Disclosure for Income Taxes Reconstructing Deferred Taxes on the Financial Statements Problems with Ratio Analysis Valuation of Deferred Tax Items Chapter Summary Chapter 5 Estimating the Tax Basis of a Firm’s Assets Introduction Factors Affecting Differences Between Asset’s Book and Tax Bases Depreciation (or Amortization) Using Different Schedules Recognizing Asset Impairments Transaction Fair Value Adjustments Asset Sales or Deemed Asset Sales Estimating the Tax Bases of Target Company’s Assets-Known Balance Sheet Estimating the Tax Bases of Target Company’s Assets-Unknown Balance Sheet Chapter Summary Chapter 6 Pension and Other Postretirement Benefits Introduction Pension versus Other Postretirement Benefit Plans Types of Pension Plans Economic Objectives of Pension Plans How Pension Plans Work Net Periodic Pension Cost Minimum Pension Liability Pension Benefits Summary Other Postretirement Benefit Plans Net Periodic Postretirement Benefit Cost Effects of Business Combinations Chapter Summary Chapter 7 Deciphering the Pension Footnote Introduction Pension Benefit Disclosure Requirements Benefit Obligation Reconciliation Plan Fair Value Reconciliation Employer Securities Included in Plan Assets Net Periodic Benefit Cost Disclosure Funded Status and Unrecognized Items Rate Disclosures Health Care Disclosures Chapter Summary Chapter 8 Analyzing the Firm’s Pension Cash Flows Introduction Estimating Future Funding Cash Flows Employer Company’s Plan Assets and Liabilities in an Acquisition Plan Liquidation Values Chapter Summary Chapter 9 Employee Stock Options Introduction The Intrinsic Valuation Method The Fair Value Method Evaluating the Firm’s Inputs to the Option-Pricing Model Tax Effects of Employee Stock Options Calculation of Diluted Earnings per Share for Companies Expensing Stock Options Accounting for Target Stock Options Rolled Over in a Purchase Acquisition Projecting Earnings Per Share (EPS) for Option-Intensive Firms Chapter Summary Chapter 10 Restructuring Charges Introduction FASB’s New Changes to Financial Accounting for Restructuring Charges Restructuring Charges-U.S. GAAP Restructuring Charges-International Accounting Standards Disclosure of Restructuring Charges Restructuring Liabilities in Business Combinations Chapter Summary Chapter 11 Discontinued Operations Introduction How Results of Discontinued Operations Impact Earnings from Continuing Operations Sources of Classification Bias Criteria for Classifying Items as Discontinued Operations The Operations Being Discontinued-Component of a Business Disposal Criteria International Accounting Treatment of Discontinued Operations Chapter Summary Chapter 12 Net Operating Loss Deductions Introduction Net Operating Loss Deductions Other Tax Considerations Relating to NOLs M&A Considerations Relating to NOLs NOL Effects on Financial (GAAP) Reporting Valuation Considerations Modeling NOL Carrybacks and Carryforwards Chapter Summary Chapter 13 Purchase Accounting for Business Combinations Introduction Purchase Accounting Basics Calculating Target Company’s Net Identifiable Assets The Net Identifiable Assets Calculation Calculating the Purchase Price Transaction Fees Fair Value of the Consideration Given Calculating Goodwill Negative Goodwill Amortization of Goodwill Accretion and Dilution of Earnings Pro Forma Presentation (as If Combined) Statements of Cash Flows Following Business Combinations Limitations on the Use of Target Company’s Net Operating Loss (NOL) Carryforwards Effects on Minority Interests in Business Combination Transactions Chapter Summary Chapter 14 Deemed Asset Sales under IRC Sections 338(h)(10) or 338(g) Introduction Overview of the Section 338(h)(10) Election Benefits of Section 338(h)(10) Sales Determining the Sale Price for a Section 338(h)(10) Election Modeling Section 338(h)(10) Transactions Chapter Summary Glossary Endnotes Index
