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7/26/2019 BMAsylSp16posted_0

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NEW YORK UNIVERSITYStern School of Business

Acquisitions, Other Restructurings and Related Topics Spring 2016

Prof. John Bildersee jilders!stern.n"u.eduTel. #$#%&&'%((#) $(%)& K*+ +l,ss -e site office hours/ NYU +l,sses

Text:0d1,nced 0ccountin2 3Custom Text fro4 $#th Edition 5 6o"le7 Sch,efer 8ou9ni:;Additional materials/ 0ddition,l te


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Are &ou %amiliar 'ith the %ollo'ing topics) These ,re co1ered -ith 1,r"in2 de2rees of de9th.

To9ic*inorit" in1est4ents Tr,din2 securities

01,il,le for s,le securitiesE=uit" 4ethod 5 4inorit" in1est4ents

*er2ers $((D ,c=uisitionP,rti,l ,c=uisition8is,99e,r,nce of ,c=uired fir4

0c=uired fir4 sur1i1esPurch,se 4ethodPoolin2 4ethod

0c=uisition 4ethod@,ir 1,lues 3,ssets fir4;V,lu,tion of int,n2ilesood-illIn 9rocess R 8Re9ortin2 units 3not se24ents;I49,ir4ent testin2Pushdo-n ,ccountin2I@RS differences

+onsolid,tions +onsolid,tion 9rocessIn1est4ent in susidi,r"+onsolid,tion 3eli4in,tion; entriesNoncontrollin2 interest

0fter ,c=uisition Inco4e st,te4entE=uit" 4ethod+ost 4ethod+,sh flo-

To9icT,


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Options:There ,re t'o grading paths# E,ch re=uires e


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Classroom per"ormance:ou are expected to "e a"le to contri"ute to discussions a"out theexercises as 'ell as other classroom discussions# Re,d the te


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Course schedule:

Preli4in,r" Schedule of To9ics Re,din2s +l,ssroo4 8iscussion E


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Basic Goals and Issues of Each Topic

Topic: Introduction

Goal: Course organization, examples of some of the issues

Basic issues: What is a restructuring? What is an acquisition? What is a consolidation?

Questions:

Are pulished !nancial statements actuall" consolidated statements?What are some consistent elements of consolidated statements?

Classroom discussion case: General #lectric !nancial statements

#xpected time: $ period

Topic: Accounting for Minority Investments Passive Investments, EquityMethod

Goal: %e&ie' the in&estment uni&erse for accounting connections

Basic issues include: T"pes of in&estment &aluation, relationships among these t"pes ofin&estments and course topics

Questions:When are fair &alues &ersus oo( &alues used?What in&estment performance impacts 'ealth, ut not income?)o' can management in*uence reporting of in&estment performance?

%ead: Chapter $ of text and notes +including representati&e results ased on interacti&espreadsheets a&ailale on -. Classes and used in class/

Classroom discussion case: 0!zer !nancial statements

%epresentati&e textoo( exercises +some ma" e done in class/:$12 through $13



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Topic: onsolidations on Acquisition Acquisition Method Balance !heet

Goal: .nderstand the fundamental issues of consolidation and !nancial integration for$445 acquisitions

Basic issues include: T"pes of acquisitions, cost of acquisitions, &aluation of acquiredassets, consolidation process

Questions:)o' does a parent compan"6s !nancial statement change as it undergoes theconsolidation process?)o' does the appraisal &alue of acquired assets impact the consolidation?)o' is the cash *o' statement a7ected " the method of acquisition?

%ead: Chapter 8 of text and notes +including representati&e results ased on interacti&espreadsheets a&ailale on -. Classes and used in class/

Classroom discussion case: Bio&ail and 9aleant 'ho controls 'ho?

"and in discussion cases: 8 of ; casesGillette A&oiding eing an acquisition

Wacho&ia %ationale for an acquisitionG


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Topic: Consolidations Partial Acquisitions

Goal: .nderstand the impact of partial acquisitions and the presence of noncontrollinginterestsE Anal"ze the impact on acquisition and thereafter

Basic issues include: The di7erence et'een consolidated income, noncontrolling interestand the parent6s incomeE the impact of assets and liailities eing reported as'holl" o'ned, ut onl" ha&e partial o'nership

Questions:What is the impact on !nancial ratios and anal"sis?Wh" 'ould a compan" acquire onl" part of a compan" if the" feel it @s a goodin&estment?Will all o'ners ha&e the same interests?Wh" are some 9ariale @nterest #ntities +9@#s/ consolidated despite a minorit"interest?

%ead: Chapter through pg $4,pgs +8F$18FF/ and notes +including representati&eresults ased on interacti&e spreadsheets a&ailale on -. Classes and used inclass/

"and in discussion case: Walmart acquisition of Dassmart +international and partial/

%epresentati&e textoo( exercises +some ma" e done in class/:18, 1, 1$8 through 1$3

#xpected time: periods

Topic: Consolidations Intercompany Transactions

Goal: .nderstand the impact of internal transactions in an integrated !rm

Basic issues include: The di7erence con!rmed and uncon!rmed transactionsE internal

pricing decisionsE possile di&ergent interests et'een the parent and thenoncontrolling interests

Questions:Wh" do internal transactions ha&e to e remo&ed?What is the impact of the remo&al?o these transactions still exist in parts of the compan" e&en if the" are remo&edin consolidation?)o' does internal pricing impact in&estment decisions and managementcompensation?

%ead: Chapter F +pgs 84;1882/ and notes +including representati&e results ased oninteracti&e spreadsheets a&ailale on -. Classes and used in class/

"and in discussion case: )enderson Co +con*ict et'een management groups/

%epresentati&e textoo( exercises +some ma" e done in class/:F18;, F18

#xpected time: 8 periods


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Topic: Consolidations Ta$es

Goal: .nderstand the impact of tax polic" on consolidation

Basic issues include: The relationship et'een tax reporting and !nancial statementreporting

Questions:

oes the t"pe of acquisition impact the tax asis?What maHorit" in&estments cannot e consolidated for tax purposes?)o' are internal di&idends and uncon!rmed internal sales taxed?)o' are taxes allocated 'ithin the consolidation?

%ead: Chapter +pgs ;8$1;;$/ and notes +including representati&e results ased oninteracti&e spreadsheets a&ailale on -. Classes and used in class/

Classroom discussion case: eBa", 0!zer !nancial statements and tax in&ersions

%epresentati&e textoo( exercises +some ma" e done in class/:F18;, F18


Topic: Alternate %estructurings

Goal: escrie restructurings that di7er from t"pical acquisitions and their relationshipsto acquisitions

Basic issues include: The di7erences and similarities among spino7s, splito7sE @0Is, JBIs,an(ruptc" liquidations and an(ruptc" fresh starts

Questions:Wh" does one e&ent often lead to another e&ent?Wh" are JBIs and resh


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Topic: oreign operations %eporting

Goal: .nderstand doing usiness using foreign currencies operating impacts !nancialstatements

Basic issues include: The impact of changes in the exchange rates on compan" !nancialstatementsE the impact of a compan"6s translation methodolog" decision +current&ersus temporal/ on !nancial statementsE the importance of &olume *o'sE the

distinction et'een monetar" accounts and current accounts

Questions:Are these *o's real?What is the impact of a compan"6s monetar" asset position on !nancialstatements?What rates should e used 'hen con&erting from one currenc" to another?What is the impact of h"perin*ation?)o' do reporting methodologies compare to those used for minorit" in&estments+descried in chapter $/?

%ead: Chapter $4 +pgs F 1 >$/ and notes +including representati&e results ased oninteracti&e spreadsheets a&ailale on -. Classes and used in class/

"and in discussion case: Coca Cola +anal"sis of a multinational !rm/

%epresentati&e textoo( exercises +some ma" e done in class/:$41 through $41$$

#xpected time: ; periods

Topic: oreign operations %is& Management

Goal: .nderstand doing usiness using foreign currencies tries to reduce !nancial ris(so it can concentrate on its usiness

Basic issues include: The impact of changes in the exchange rates on the costs of doingusiness due to changes in rates during incomplete transactions compan" !nancialstatementsE the impact of a compan"6s translation methodolog" decision +current&ersus temporal/ on !nancial statementsE the importance of &olume *o'sE thedistinction et'een monetar" accounts and current accounts

Questions:)o' does hedging ameliorate a compan"6s !nancial ris(?oes a compan" hedge &irtuall" e&er" acti&it" denominated in foreign currenc"?@s hedging perfect?)o' do hedging choices and accounting methodologies compare to those used forminorit" in&estments +descried in chapter $/?

%ead: Chapter 3 and +pgs >$ 1 >;/ and notes +including representati&e results asedon interacti&e spreadsheets a&ailale on -. Classes and used in class/

Classroom discussion case: General #lectric +reporting of its policies/

%epresentati&e textoo( exercises +some ma" e done in class/:31$, 31, 313, 31$$through 31$;, 3183, 31;$, 31;8

#xpected time: ; periods


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Sample optional paper: +hoose , t-o di2it or three di2it SI+ industr" 3or , three di2it N0I+S code or ,t-o di2it ISI+ code;. Select three of the fi1e l,r2est co49,nies in the industr" 3usu,ll" " s,les or si>e indoll,rs; ,nd one other co49,n" in the industr" th,t interests "ou. Include ,99ro9ri,te references.

o ,c: three fisc,l "e,rs for e,ch co49,n" ,nd then re1ie- the series of structur,l ch,n2es th,t h,1e

occurred durin2 the 9,st three "e,rs.

+onsider three t"9es of structur,l ch,n2es/

Intern,l ch,n2es such ,s o,rd u9he,1,ls$7 ch,n2es in se24ents ,nd ch,n2es in 2eo2r,9hic,lfocus

E


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Mini case grade guide: +,ses 4ust e t"9ed. Written 4,teri,l -ill not e ,cce9ted or re1ie-ed. The,4ount of credit -ill e 2uided " this su44,r". Be concise ,ssu4e "ou ,re su44,ri>in2 the rele1,ntissues for 4,n,2e4ent. Use ,t le,st $H line s9,cin27 nor4,l 9,2e orders ,nd si>e $$ font. Use one9,r,2r,9h to su44,ri>e the underl"in2 issues ,nd one 9,r,2r,9h to descrie "our o9inion. There is ,one 9,2e li4it.

8i4ension Poor 3%; 01er,2e 3; E


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+o49rehensi1e inco4e@orei2n currenc" e1ents S9ot ,cti1it"

6ed2in2@,ir V,lue hed2es+,sh flo- hed2es@ir4 co44it4ents@orec,sted e1ents6ed2e effecti1enessO9tions


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! 'uic$ Overvie# and Summary: There 'erethree ,cce9t,le consolid,tion 4ethods. Poolin2 h,seen dis,llo-ed for ne- ,c=uisitions since #(($. The 9urch,se 4ethod h,s een dis,llo-ed for ne-,c=uisitions since 8ece4er #(('. The ,c=uisition 4ethod is the onl" ,cce9t,le 4ethod for ne-,c=uisitions tod,". 6o-e1er7 consolid,ted st,te4ents tod," include ele4ents of ,ll three 4ethods -iththe no lon2er ,llo-ed 4ethods slo-l" dis,99e,rin2 fro4 the fin,nci,l st,te4ents ,s the ,ssoci,ted,ssets ,nd li,ilities ,2e.

Summar& o% Consolidation ethods

Accepta"leAcquisition ethod

8ot Accepta"lea%ter 200=

-urchase ethod

8ot Accepta"lea%ter 2001-ooling

>alues air >alue *i< Boo: V,lueT&pe o% %inancial consideration An& 0n" Stoc: 9ri4,ril"

Amount o% %inancial consideration air !alue 0djusted f,ir 1,lue Boo: 1,lue

>aluation ad?ustments on 100@ acquisition 100@ ad?ustment $((D ,djust4ent None>aluation ad?ustments on partial 3less than

100@5 acquisition 100@ ad?ustment 0c=uired 9ortion onl" None

Assets disco!ered 8e' intangi"les Ne- int,n2iles None

0nd ood-ill %or parent and @or 9,rent onl" None

8oncontrolling interest

Consolidation o% the su"sidiar& nclude onl& e!ents Include onl" e1ents Tre,ted ,s h,1in2

a%ter the acquisition ,fter the ,c=uisition een to2ether fore1er

Additional comments:

n!estment Accounting

O-nershi9 #(D #(%Q(D Q(D01,il,le for S,le

Tr,din2 E=uit" *ethod E=uit" *ethod % 9rior to consolid,tion

+ost *ethod % 9rior to consolid,tion

Si4il,r to ,ccountin2 for forei2n ees

Ris:

Tr,nsl,tion Re4e,sure4ent*,jor O9er,tions *inor O9er,tions

Net 0ssets Net *onet,r" 0ssets +o44it4ents

+o49rehensi1e Inco4e Inco4e @orec,sted E1ents

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