The Merger And Acquisition ( M & S Essay
The new accounting standard called the Ind-AS would be effective from April 1, 2016. It would require companies to make changes in the way they report their revenue and taxes. On an average any deal takes eight months to a year to close, which means if a deal starts now, the new standard would be applicable by the time it is concluded.
As per the current accounting standard, there are no comprehensive set of rules that addressed accounting for business combinations and the current accounting is driven by the form of transaction, i.e. legal merger, share acquisition, etc. In Ind-AS all mergers and acquisition are recorded using the purchase method that considers the acquisition date fair value of all the assets and liabilities of the acquiree.
Unless the companies structure their deals taking this into account, the deals could damage their balance sheet rather than improving it. Thus the companies and PE firms have now started relooking into their deals and restructuring their deal terms. Some of the deals have been put on hold until there is more clarity on the implications of the new rules.
Definition of business:
The current accounting standard does not define the term business but the new standard does. It defines business as ‘an integrated set of activities and assets that is capable…