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1、精选优质文档-倾情为你奉上Consolidated Financial Statements Michael Davis and James Alargay IIIThe procedural aspects of consolidated financial statements have gone practically unchanged for almost 50 years, with the exception of accounting changes related to goodwill and the pooling-of-interests method. The wel
2、l-accepted methodology behind consolidated entities will change dramatically when new FASB standards become effective for periods beginning on or after December 15, 2008. The resulting consolidated statements may look much the same, but the behind-the-scenes mechanics and processes will be significa
3、ntly different. Some reported amountsand their interpretationwill diverge from their traditional meanings.CPAs and financial executives should prepare themselves for major changes in preparing consolidated financial statements. What finally emerged from FASBs red deliberation is complex, so an overv
4、iew of the concepts can help professionals quickly digest the changes in the final standards.New Standards Based on Two Exposure DraftThe new Statements of Financial Accounting StandardsSFASs 141(R),Business Combinations,and 160,No controlling Interests in Consolidated Financial Statementsemerged in
5、 December 2007 from the extensive red deliberation of two FASB exposure drafts (ED) issued in June 2005. As the first major joint project between FASB and the International Accounting Standards Board (IASB), the business combinations project sought to demonstrate that the two standards-setting bodie
6、s can work together. Given the extent of the changes, evaluating the success of those endeavors may take time. In this case, International Financial Reporting Standard (IFRS) 3 (revised in 2007), which is the IASBs companion statement on business combinations, reflects most of the changes in SFAS 14
7、1(R). In a nutshell, the purchase method, now to be known as the acquisitionmethod, has been further modified such that, in many mergers, it will no longer rely on historical costs. Combinations involving either an acquisition of less than 100%, or control that is achieved in steps, will see traditi
8、onal cost-based purchase accounting replaced by estimates of the acquired companys fair value. The estimated fair value of contingent consideration agreements becomes part of the consideration that is recordedat the acquisition date, with subsequent changes in its fair valuereported in current earni
9、ngs, not as purchase-price adjustments. Additional contingent assets and liabilities will likely be recognized, and acquired in-process research and development (R&D)will no longer be expensedas if it was internally developed R&D, but instead it will be capitalized and initially subjected to periodi
10、c impairment testing.The major changes incorporated in SFASs 141(R) and 160 can be divided into six categories, which also include some lesser changes. When appropriate, excerpts from respondent comments to the EDs are provided below.Broader Definition of a BusinessSFAS 141(R)s broader definition of
11、 a business brings mutual entities within its scope for the first time, according to the definitions in para. 3. This means that mutual entities can no longer use pooling-of-interests accounting when they merge. This seemingly innocuous change elicited a majority of negative responses arguing that c
12、ombinations of mutual entities are true mergersnot acquisitionswith no consideration exchanged. One respondent to the ED noted: “With no consideration in a transaction, it is not practical to determine an accurate fair value of the acquired company to the acquirer. We are concerned the results may b
13、e misleading primarily because they do not reflect the combinations true economics.”Acquisitions Recorded at Full Fair Value“Full fair value,” now referred to as the measurement principle, is the most controversial issue in the joint FASB-IASB business combinations project. Any “partial” controlling
14、 acquisition (less than 100%) will be reported not at the price paid, but at the acquirers estimated full fair value for the company as a whole. For example, an $8 billion acquisition of 80% of a company could be reported at $9.5 billion if that is the entitys estimated fair value. Not only are all
15、identifiable assets and liabilities consolidated at their full fair values, SFAS 141(R) bases goodwill on the excess of the total entitys fair value over the fair value of the identifiable net assets. FASB board member Leslie Seidmans wide-ranging dissent to SFASs 141(R) and 160 cites her objection
16、to attributing goodwill to the minority, or no controlling, interest.Thus, the no controlling interest will also be reported at its full fair value upon acquisition. FASB is adopting the entity, or economic-unit, theory of consolidations, and discarding the parent theory, with its long history of fo
17、cusing on the cost of the ownership percentage purchased.Consequences of the full-fair-value approach. Most respondents to the ED agreed with recording identifiable assets and liabilities at fair value, but not goodwill; unlike identifiable assets, goodwill cannot be measured directly. In addition,
18、the acquirers total fair value cannot be reliably measured when less than 100% is purchased and a “control premium” exists.Although SFAS 141(R) promotes more comprehensive and consistent accounting across firms, shows how financial ratios that use the new financial statement data are not comparable
19、to previous measures, and they will likely be less reliable due to the concerns about estimation noted earlier. Consistent with the full-fair-value approach to valuation, SFAS 160 redefines “consolidated net income” as “group income” under current GAAP, before any subtraction for minority interest.
20、Comparing the redefined consolidated net income with current GAAPs “controlling interests share of the group income” should be done with care.Respondents comments and other issues.Respondents generally opposed the proposal to record the fair value of contingent consideration liabilities at the acqui
21、sition date, and to record subsequent changes in their fair value in earnings. One practical reason for the opposition appeared in FASBs “Comment Letter Summary”:Contingent consideration cannot be measured reliably at the acquisition date. Contingent consideration occurs because the buyer and seller
22、 are not able to agree upon the fair value of the acquirer; therefore, reliably estimating the fair value of the contingent consideration is by definition impossible emphasis added.Another reason for the opposition alludes to the possibility of manipulation; respondents views were summarized as foll
23、ows:The proposal might motivate acquirers to overestimate the acquisition-date fair value of contingent consideration so that the reversal of those liabilities results in income in future periods.One hopes that such manipulation using so-called cookie-jar reserves will not proliferate. However, rece
24、nt high-profile company financial reporting frauds suggest that such manipulation will compound the practical measurement concerns that make the reliability of contingent consideration estimates inherently suspect. Two other aspects of SFAS 141(R) that bear on the full-fair-value approach to busines
25、s combinations are as follows: Acquisition-date (or pre-acquisition) contingencies have been recognized at fair value for some time, generally in accordance with the “probable” test in SFAS 5,Accounting for Contingencies. SFAS 141 (R), however, requires recognition of all contractual rights and obli
26、gations, and of no contractual contingencies that more likely than not meet the definition of an asset or liability under FASB Concepts Statement 6. Contingencies not recognized at acquisition will be accounted for under other applicable GAAP, such as SFAS 5. Thus, many more pre-acquisition continge
27、nt liabilities and assets will be recognized up front, primarily because “more likely than not” creates a lower recognition threshold than “probable.” Planned post-acquisition restructuring costs must be expensed, rather than added to the cost of the investment or considered in the carrying amounts
28、assigned to identifiable assets and liabilities.Step AcquisitionsTwo facets of this issue stand out. First, when obtaining control in a series of purchases or steps, SFAS 141(R) requires restating all previous purchases to fair value as of the date control is achieved, and reporting any gain or loss
29、 in income. This approach sharply contrasts with the current “cost accumulation” or “purchase method” that accounts for each purchase separately: Different prices paid for several blocks of stock acquired result in reporting portions of the identifiable net assets at different fair values, and produ
30、ce layers of goodwill.To illustrate SFAS 141(R)s accounting, suppose the acquirer carries its 40% share of the targets stock at $120 million. When it obtains control by purchasing another 20% for $75 million, the acquirer revalues the previous 40% to $150 million and reports a $30 million gain in in
31、come. Thus, the entire 60% position will be carried at $225 million, compared with $195 million under current GAAP. Most respondents to the exposure draft agreed with 141(R)s approach but favored reporting any gain or loss in other comprehensive income, because of its similarity to unrealized gains
32、or losses on available-for-sale securities.Second, when changes in ownership interests occur after control is obtained, perhaps by increasing ownership from 60% to 70% by purchase in the open market or decreasing ownership from 70% to 60% by sale in the open market, the difference between the amount
33、 paid (or received) and the carrying value of that ownership interest is reflected in additional paid-in capital. Such transactions will now effectively be treated as treasury stock transactions. Current GAAP records increases in ownership using the purchase method approach described here. SFAS 160
34、augments the straight purchase approach by comparing the price paid with the carrying value of the no controlling interest acquired, and recording any gain or loss in additional paid-in capital.illustrates the differences. BDO Seidman captured the majority view in its comment letter:This particular
35、part of the proposal is the most troublesome to us, because it fails to hold management accountable for the costs incurred in acquiring a business and requires part of the cost, as well as part of the gain or loss on disposal, to permanently bypass the income statement.Expensing Acquisition CostsSFA
36、S 141(R) requires the expensing of all acquisition costs, contrary to longstanding practice and, as noted by most respondents to the ED, contrary to the treatment of transaction costs in other settings. For example, just as companies capitalize transportation or installation costs for new equipment,
37、 respondents argued that acquisition transaction costs are an integral part of the purchase price. Because, in the words of one respondent: “Every acquirer considers transaction costs in determining what they are willing to pay for an acquirer; they form part of the consideration transferred and par
38、t of the fair value of the acquirer.” (Unchanged under the new rules is the treatment of costs of registering and issuing equity and debt securities in the business combination.)Capitalization of Purchased In-Process R&DIn a major departure from the old SFAS 141 issued in 2001, which followed SFAS 2
39、 and FASB Interpretation (FIN) 4 rules that require the expensing of all R&D expenditures, SFAS 141(R) requires capitalizing purchased in-process R&D (IPRD) as an indefinite-life intangible asset until completion or abandonment, although subsequent expenditures will be expensed. The new rules specif
40、y that IPRD be neither immediately written off nor amortized, but instead be subject to annual impairment testing, similar to the treatment of goodwill.The support for capitalizing is fairly straightforwardthe acquirer pays to obtain some amount of future benefitwhereas the argument against capitali
41、zing centers on the inability to reliably measure IPRD or the benefit period. Unlike its internally generated counterpart, though, an external purchase price lies behind the capitalization of purchased IPRD. Even so, some argue that IPRD does not meet the definition of an asset when its low likeliho
42、od of success fails to signal probable future economic benefits.Significance of the ChangesThe changes discussed above are significant, represent major departures from longstanding practice, and were the result of a lengthy red deliberation process. Because this is FASBs first truly joint project wi
43、th the IASBand “final standards” were in process for a long time due to coordinating with the IASBthe authors believe that these significant changes to business combinations and consolidation methodology signal growing cooperation between the two boards. Given the move toward fair-value accounting,
44、adoption of the economic-unit concept was expected, at least to some degree. Nevertheless, estimating total goodwill in acquisitions of less than 100% may become too problematic no matter how strongly FASB desires to adopt the full economic-unit approach to consolidated statements. But it rejected l
45、imiting goodwill to the amount purchased, a partial economic-unit approach. Possibly more contentious, SFAS 141(R)s allowance of special treatment for purchased IPRD without addressing the entire R&D question could create troublesome inconsistencies, especially given the measurement difficulties.Now
46、 that the standards have been adopted, CPAs and businesses have several months to prepare for the dramatic changes in accounting for controlled entities. Not only are more fair values entering financial reporting, new inconsistencies are being introduced into the mix, because SFAS 141(R)s treatment
47、of acquisition costs and of purchased in-process R&D represents a break from longstanding GAAP. Reliability issues aside, users will need to carefully adjust their interpretation of financial performance, especially when comparing to prior periods.“Consolidated financial Statements” the CPA journal;
48、 February.2008合并财务报表Michael Davis and James Alargay III除了会计变更相关的商誉和权益法，合并财务报表的程序方面已经将近有50年不变。当新会计准则委员会的标准在2008年10月15日前后生效时，在合并实体方法的后面，会看到普遍接受的方法发生戏剧性的变化。由此产生的合并报表看起来是一样的，但幕后的技巧和过程将明显不同。一些报道金额和他们的解释将偏离其传统意义。对于在编制合并财务报表的重大变化，注册会计师和财务主管应该做好准备。最后出现在财务会计标准委员会的红色审议是复杂的，所以这样的概述概念可以帮助专业人士迅速消化最终标准的变化。基于两种征求意
49、见稿的新标准财务会计标准的新准则-财务会计准则第141条，企业合并第160条在没有控股权的合并财务报表-出现在2007年12月来自2005年5月发行的进过广泛讨论的财务会计准则委员会意见征求稿曝光草稿。作为财务会计准则委员会和国际会计准则委员会第一个重大合资项目，企业合并项目将力求证明这两个标准制定机构可以一起工作。对于这种程度的变化，评估这些努力的成功需要一段时间。在这种情况下，国际财务报告标准 (2007年修订)，是国际会计准则委员会合并同伴的共同声明，反映了大部分的变革成果。简而言之，购买法，现在被称为收购法，得到进一步修改。例如，在许多合并中，它将不再依赖于历史成本。合并涉及要么是小于100%雇员的收购，要么是控制实现步骤，我们将看到传统购买会计成本的采购会被收购公司的公允价值所取代。在对价协议中的估计公允价值或将成为部分审议，会在收购日期中记录。随后关于在当前收