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Good Morning,
This question comes from the point of view of the case study exam.
How do we account for a merger? Is it like acquiring a subsidiary? if so, do we do year end consolidation of their financial statements?
Or it is like combining all assets and liabilities and treating the two companies like one from then on? If so, what happens to the NCI, investors who retain ownership in the merged company?
thank you.
Hi,
Technically a merger is when two companies combine to form a new company and the previous companies no longer exist, similar to what happened when British Airways and Iberia merged to form the International Consolidated Airlines Group (IAG).
Thanks
Thanks, that’s great.
Would you help me please to find out how we account for it?
Do we revalue the merged entity’s assets and liabilities to fair value? How do we merge the equity?
If it is not a subsidiary I assume there is no goodwill but what do we do with the difference of the fair value and the book value?
What do we do with the owners of the merged entity that decided to keep on to their shares?
I am really sorry but it came up in a past case study and I couldn’t get a definite answer from the internet as there is a lot about merger accounting but it seems to me that it changed over the years and the info on the internet is still reflecting how it used to be.
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