NEW YORK UNIVERSITY
Stern School of Business
Accounting for Mergers, Acquisitions and Related Matters
Spring 2009
Prof. John Bildersee
jbilders@stern.nyu.edu
Tel. 212-998-0027
10-79 KMC
Class web site: Blackboard
Monday & Wednesday 12:30 – 1:45 (KMC 4-80) ; 3:30 – 4:45 (KMC 4-80)
Text: Advanced Financial Accounting (Custom Text from 9th edition – Hoyle, Schaefer & Doupnik)
Course Content: This course concentrates on mergers and acquisitions and the development of
consolidated financial statements. It also covers accounting for international operations and
selected financial instruments. The primary focus is on detailed statement development and
problem solving. Some analysis will be included. The course can be immediately helpful as past
students have frequently volunteered that the course materials have helped them in job
interviews.
Warning: The typical accounting course which goes from topic to topic and the materials
frequently seem distinct and independent of each other. This course is different from the typical
accounting course as the topics in this course are detailed and frequently build on materials
presented earlier in the semester. Difficulties faced early in the semester should be dealt with
promptly. It is preferred, but not required, that you have taken Financial Reporting and Disclosure
(undergraduate) and/or Financial Statement Analysis (graduate) before this course due to its
detail.
Attendance: Attendance and completion of homework are important. You should attend every
class to assure a good understanding of the course materials.
Homework: Assigned homework should be handed in at the beginning of class. Do not spend too
much time on any question. Instead, try to work the exercise in your own way and, if you are
stuck, try to understand the answer that is on Blackboard. There is no need to copy the answer
as I am looking for a honest effort, not perfection. Homework is due on the first date of the
following chapter to assure some discussion prior to doing the exercises and to aid in preparation
for any quiz on that chapter. The homework due dates may change if our experience deviates
from this schedule. Late homeworks will be accepted for reduced credit if received by the
next class period.
Classroom performance: Exercises designated for the classroom should be reviewed before
class. You are expected to be able to contribute to discussions about the exercises as well
as other classroom discussions. Although it may be difficult to contribute to the discussion due
to the large size of the class contributions during class can only help your grade. Positive
contributions include questions and well-intended responses irrespective of their accuracy.
Support materials: Visit Blackboard early and often. It has announcements, class notes, slide
shows, spreadsheets, sample exams and miscellaneous articles. Many of the relevant materials
will be provided as handouts.
Exams: There are two midterms and a final. Exams are open book. There are no make-up
exams. If you cannot take an exam at the scheduled time you are expected to take it early. The
exams will be given on the stated dates. The topics may change if the course falls behind
schedule.
Quizzes: There will be several 15 minute quizzes. Quizzes are open book. Quizzes cannot be
rescheduled. There are no make-up quizzes. Quizzes are scheduled for the first class following
a given chapter and will focus on that chapter. The dates of the quizzes may change if our
experience deviates from this schedule. The quizzes cannot hurt your course (percent) average.
Instead, they may be used to reduce up to 70% of the impact of your poorest exam.
You are expected to follow the undergraduate code of conduct and the graduate honor
code throughout the semester.
Tentative Grading:
Exam 1
Exam 2
Exam 3
Classroom attendance and homeworks
Classroom participation
An alternate weighting will be used if an exam is missed.
29 points
29 points
29 points
13 points
Possible extra credit
We follow Stern’s default policies for anything not covered here.
Date
1/21
1/26
Topic
Reading
Introduction
Accounting for Minority Investments – Passive Ch 1(except pp.
Investments, Equity Method
Accounting for Minority Investments – Equity Ch 1
Method
1/28
2/2
2/4
2/9
2/16
2/18
2/23
2/25
3/2
3/4
3/9
3/11
3/23
3/25
3/30
4/1
4/6
4/8
4/13
4/15
4/20
Consolidations on Acquisition – Acquisition
Method – Balance Sheet
Consolidations – Acquisition Method –
Balance Sheet
Consolidations - Acquisition Method Intangibles
President’s Day – No Class
Consolidations – Balance Sheet – Purchase
Method & Pooling (Old Methods)
Consolidations – After Date of Acquisition
(including Cost and Equity Methods)
Consolidations – After Date of Acquisition –
Income Statement
Consolidations – After Date of Acquisition –
Income Statement
Consolidations – After Date of Acquisition –
Impairment
Consolidations – After Date of Acquisition –
Partial Acquisitions/ Review
Examination 1 (through chp 3)
Consolidations – After Date of Acquisition –
Partial Acquisitions
Consolidations – After Date of Acquisition –
Partial Acquisitions; – Intercompany
Transactions – Land (pp216 – 218)
Consolidations – Intercompany Transactions
– PPE (pp218 – 223)/Review
Consolidations – Intercompany Transactions
– Sales (197 – 216)
Examination 2 (Chps 4 - 5 (excluding
sales))
Foreign Currency – Introduction
Foreign Currency Conversions– (Current
Method)/ Review
Foreign Currency Conversions – (Temporal
Method)
Foreign Currency – Consolidations
Ch 2 (except pp
61-68)
Ch 2 (except pp.
61-68)
Ch 2 (except pp.
61-68)
Ch 2 (pp. 61 – 68)
Classroom
Discussion
1-4, 1-5
1-11, 1-14
Comprehensive
Problem (CP)
2-7, 2-8
2-13, 2-14
2-21, 2-28, CP
3-4, 3-7
Ch 3
3-11, 3-12, 3-13
Ch 3
3-22
Ch 3
3-16, CP
Ch 4
Chp 4,5 (Land
Transfers only)
Ch 5
Ch 5
1-12, 1-17, Quiz
(Chp 1)
2-9, 2-10
Ch 3
Ch 4
Assigned
Homework Due
2-12, 2-18, Quiz
(Chp 2)
4-1, 4-5, 4-12 thru 3-17, 3-18, 3-19, 321
4-14
4-15 thru 4-19
4-26 CP
5-2, 5-8, 5-10 thru 4-22, 4-27, Quiz
(Chp 4)
15
5-20 CP
(Chps 2-3 are included as bases for chps 4 – 5)
Ch 10
Ch 10
Ch 10
Ch 10
5-24, 5-25*
10-4, 10-5
10-6, 10-7, 10-8, 109
10-8, 10-9
10-35 CP
Foreign Currency – Transactions
4/22
4/27
4/29
5/4
Ch 9
9-1, 9-4
5-22, 10-15, 10-28,
Quiz (Chp 10)
Foreign Currency – Forwards, Hedges
Ch 9
9-9, 9-15 thru 9-17
Foreign Currency – Commitments,
Ch 9
9-31b, 9-32b CP 9-11, 9-12, 9-13 ,929
Forecasted Transactions
Review
Final Exam (Chp 5, (Sales only), Chps 9-10) (chps 2-4 included as bases for chp 9 consolidation)
Homework related notes:
Several problems and questions include parts about three different accounting methods associated with investments
(prior to consolidation) – the full or complete equity method, the incomplete or partial equity method and the cost
method. You may ignore any questions referring to the incomplete or partial equity method as it is merely a mix of the
full or complete equity method and the cost method and offers no new perspectives.
*Ignore any portion of any problem involving intercompany sales
Additional comments:
Investment Accounting
Ownership
<20%
Available for Sale*
X
Trading*
X
Equity Method
Equity Method
Cost Method
20-50%
>50%
X
X- prior to consolidation
X- prior to consolidation
*Similar to accounting for foreign exchange
There are three consolidation methods. Pooling has been disallowed for new acquisitions since 2001 (and will be
discussed for only a few minuntes). The purchase method has been disallowed for new acquisitions since December
2008. The acquisition method is the only acceptable method for new acquisitions today. However, consolidated
statements today will include elements of all three methods with the no longer allowed methods slowly disappearing from
the financial statements as the associated assets and liabilities age.
We will focus on the acquisition method. The purchase method may linger on CPA exams for the coming 6 to 9 months.
Many of the details of the purchase and acquisition methods overlap.
Summary of Consolidation Methods
Values
Type of financial consideration
Amount of financial consideration
Valuation adjustments on 100%
acquisition
Valuation adjustments on partial (less
than 100%) acquisition
Assets discovered
Goodwill
Consolidation of the subsidiary
Acquisition Method
Fair Value
Purchase Method
Mix
Pooling
Book Value
Any
Any
Fair value
Adjusted fair value
Stock primarily
Stock book value
used
100% adjustment
100% adjustment
None
100% adjustment
New intangibles
Possible
Include only events
after the acquisition
Acquired portion only
New intangibles
Possible
Include only events
after the acquisition
None
None
None
Treated as having
been together forever