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Accounting for M and A, Credit, and Equity Analysts - James Morris

Accounting for M and A, Credit, and Equity Analysts

Hardcover Published: 24th June 2004
ISBN: 9780071429696
Number Of Pages: 288

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As each new accounting question or scandal hits Wall Street, investment professionals too often find themselves asking, "What happened?" "Accounting for M&A, Equity, and Credit Analysts" answers the most common accounting questions, all in an easy-to-follow format designed to provide investment professionals with real-world, hands-on knowledge of key accounting treatments, models, and practices. Written by well-known M&A expert James E. Morris, this versatile accounting desk reference bridges the gap between what is taught in business school and what is needed in the real world.

Prefacep. xi
Introductionp. xiii
List of Abbreviationsp. xv
Equity Method of Accounting for Investmentsp. 1
Introductionp. 1
Description of the Equity Methodp. 1
Tax Considerations When Using the Equity Methodp. 5
Accounting under the Equity Method--Excess of Cost over Equity Purchasedp. 8
Accounting under the Equity Method--Intercompany Transactionsp. 10
Guidance for Applying the Equity Methodp. 12
SEC Staff Views Concerning the Equity Methodp. 17
When to Use the Equity Method--Summaryp. 17
Accounting for Cash Flows from Equity Method Investmentsp. 18
Modeling the Equity Method of Accounting in Projection Modelsp. 19
Chapter Summaryp. 22
Minority Interestsp. 25
Introductionp. 25
Minority Interestsp. 25
Overview of Accounting for Minority Interestsp. 26
Treatment of Minority Interests for Enterprise Valuationp. 31
Forecasting Minority Interestsp. 32
Treatment of Minority Interests in M&A Transactionsp. 32
Modeling Minority Interestsp. 35
Chapter Summaryp. 36
Deferred Income Taxes and Income Tax Reportingp. 39
Introductionp. 39
Basic Principles of Tax Reportingp. 39
The First Principlep. 40
The Second Principlep. 40
The Third Principlep. 50
The Fourth Principlep. 50
Treatment of Deferred Income Tax Items in M&A Transactionsp. 52
Modeling Income Taxes in Projection Modelsp. 54
Calculating the Provision for Taxes--Detailed Calculationp. 57
Chapter Summaryp. 59
Deciphering the Deferred Tax Footnotep. 61
Introductionp. 61
Financial Statement Disclosure for Income Taxesp. 61
Reconstructing Deferred Taxes on the Financial Statementsp. 68
Problems with Ratio Analysisp. 73
Valuation of Deferred Tax Itemsp. 74
Chapter Summaryp. 74
Estimating the Tax Basis of a Firm's Assetsp. 77
Introductionp. 77
Factors Affecting Differences Between Asset's Book and Tax Basesp. 78
Depreciation (or Amortization) Using Different Schedulesp. 78
Recognizing Asset Impairmentsp. 84
Transaction Fair Value Adjustmentsp. 86
Asset Sales or Deemed Asset Salesp. 87
Estimating the Tax Bases of Target Company's Assets--Known Balance Sheetp. 87
Estimating the Tax Bases of Target Company's Assets--Unknown Balance Sheetp. 91
Chapter Summaryp. 93
Pension and Other Postretirement Benefitsp. 95
Introductionp. 95
Pension versus Other Postretirement Benefit Plansp. 96
Types of Pension Plansp. 96
Economic Objectives of Pension Plansp. 97
How Pension Plans Workp. 98
Net Periodic Pension Costp. 101
Minimum Pension Liabilityp. 112
Pension Benefits Summaryp. 112
Other Postretirement Benefit Plansp. 113
Net Periodic Postretirement Benefit Costp. 114
Effects of Business Combinationsp. 116
Chapter Summaryp. 118
Deciphering the Pension Footnotep. 119
Introductionp. 119
Pension Benefit Disclosure Requirementsp. 120
Benefit Obligation Reconciliationp. 120
Plan Fair Value Reconciliationp. 126
Employer Securities Included in Plan Assetsp. 129
Net Periodic Benefit Cost Disclosurep. 130
Funded Status and Unrecognized Itemsp. 130
Rate Disclosuresp. 130
Health Care Disclosuresp. 132
Chapter Summaryp. 133
Analyzing the Firm's Pension Cash Flowsp. 135
Introductionp. 135
Estimating Future Funding Cash Flowsp. 136
Employer Company's Plan Assets and Liabilities in an Acquisitionp. 142
Plan Liquidation Valuesp. 143
Chapter Summaryp. 144
Employee Stock Optionsp. 145
Introductionp. 145
The Intrinsic Valuation Methodp. 145
The Fair Value Methodp. 147
Evaluating the Firm's Inputs to the Option-Pricing Modelp. 148
Tax Effects of Employee Stock Optionsp. 150
Calculation of Diluted Earnings per Share for Companies Expensing Stock Optionsp. 150
Accounting for Target Stock Options Rolled Over in a Purchase Acquisitionp. 153
Projecting Earnings Per Share (EPS) for Option-Intensive Firmsp. 155
Chapter Summaryp. 156
Restructuring Chargesp. 157
Introductionp. 157
FASB's New Changes to Financial Accounting for Restructuring Chargesp. 158
Restructuring Charges--U.S. GAAPp. 158
Restructuring Charges--International Accounting Standardsp. 168
Disclosure of Restructuring Chargesp. 169
Restructuring Liabilities in Business Combinationsp. 169
Chapter Summaryp. 170
Discontinued Operationsp. 173
Introductionp. 173
How Results of Discontinued Operations Impact Earnings from Continuing Operationsp. 173
Sources of Classification Biasp. 175
Criteria for Classifying Items as Discontinued Operationsp. 176
The Operations Being Discontinued--Component of a Businessp. 176
Disposal Criteriap. 177
International Accounting Treatment of Discontinued Operationsp. 179
Chapter Summaryp. 180
Net Operating Loss Deductionsp. 183
Introductionp. 183
Net Operating Loss Deductionsp. 183
Other Tax Considerations Relating to NOLsp. 186
M&A Considerations Relating to NOLsp. 186
NOL Effects on Financial (GAAP) Reportingp. 187
Valuation Considerationsp. 189
Modeling NOL Carrybacks and Carryforwardsp. 190
Chapter Summaryp. 195
Purchase Accounting for Business Combinationsp. 197
Introductionp. 197
Purchase Accounting Basicsp. 198
Calculating Target Company's Net Identifiable Assetsp. 200
The Net Identifiable Assets Calculationp. 209
Calculating the Purchase Pricep. 209
Transaction Feesp. 210
Fair Value of the Consideration Givenp. 213
Calculating Goodwillp. 215
Negative Goodwillp. 216
Amortization of Goodwillp. 219
Accretion and Dilution of Earningsp. 222
Pro Forma Presentation (as If Combined)p. 229
Statements of Cash Flows Following Business Combinationsp. 230
Limitations on the Use of Target Company's Net Operating Loss (NOL) Carryforwardsp. 230
Effects on Minority Interests in Business Combination Transactionsp. 231
Chapter Summaryp. 233
Deemed Asset Sales under IRC Sections 338(h)(10) or 338(g)p. 237
Introductionp. 237
Overview of the Section 338(h)(10) Electionp. 237
Benefits of Section 338(h)(10) Salesp. 239
Determining the Sale Price for a Section 338(h)(10) Electionp. 242
Modeling Section 338(h)(10) Transactionsp. 247
Chapter Summaryp. 250
Glossaryp. 253
Endnotesp. 259
Indexp. 265
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780071429696
ISBN-10: 0071429697
Audience: General
Format: Hardcover
Language: English
Number Of Pages: 288
Published: 24th June 2004
Publisher: McGraw-Hill Education - Europe
Country of Publication: US
Dimensions (cm): 24.5 x 20.0  x 2.0
Weight (kg): 0.75
Edition Number: 1