Acquisition
Firm A purchases a controlling interest of firm B -> firm B remains an independent legal entity
Merger
legal transaction in which one firm ceases to exist as an independent legal entity
Co-operation
Firm A & B voluntarily agrree to cooperate in selected areas
Forms of Post Merger Acquisition
Holding structure (conglomerate acquisition & PE) -> minimal integration (mind. integration of reporting systems)
One partner dominates (horizontal/ vertical integration) -> full integration (target firms adopts systems and culture of acquiring firm)
Best of both approach (horizontal/ vertical integration) -> no dominant partner (best elements of both merged firms are combined)
business combination
transaction or event in which acquirer obtain control over one or more firms
Group accounting HGB
Subsidiaries -> Full Consolidation
Joint Ventures -> choice between proportionate consolidation or equity method
Associates -> equity method
other investments -> at cost
Group Accounting IFRS
Joint operation -> proportionate consolidation
joint venture -> equity method
associates -> equity method
other investments -> fair value
Accounting Methods for M&As
Acquisition Method
Pooling of Interest Method -> assumes no acquisition (only that two business merged) -> no revaluation, just book value allocation
Fresh start method -> assumes both entities cease to exist (nwe firm arises) -> revaluation of both entities
Goodwill
asset representing the future benefit arising from other assets acquired in a business combination that are not individually identified and seperately recognized
Why goodwill allocation to CGUs?
Goodwill doesn’t generate any CF by itself and therefore cant be sold in the market
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