Thankfully, most BV experts have long been gearing up for Financial Accounting Standards Board Statement No. 141( R), which took effect last month and possibly created more challenges and volatility for valuing assets and liabilities during mergers, acquisitions, and other transactions than ever before.
As business appraisers well know, 141(R) and the current financial crisis will prompt many companies to alter their fiscal planning and require their reporting to be more transparent in demonstrating the value of assets and liabilities. According to Stamos Nicholas, principal and national Business Valuation leader. “The turbulent financial markets have already significantly impacted transactions. Understanding the intricacies of implementing Statement No 141(R) will be critical for companies as they consider their deal strategies for 2009 and beyond.”
Nicholas—who will share more of his expert insights at our much-anticipated 2nd Annual Summit on Fair Value for Financial Reporting on February 2-3 in New York City—is slated to join Ernst & Young ’s Anthony Aaron for an informative discussion of “Impairment Testing in Today's Market Environment.” Nicholas will also address attendees’ questions along with Aaron, Mike Mard, Tony Matt Pinson, and Howard Scribner, during a Summit on Fair Value for Financial Reporting session, “Big 4 Panel: Get Your Questions Answered BEFORE the review!”
In the interim, Nicholas fielded a couple of queries from BVWire™ on SFAS 141(R) and what BV experts are and should be doing to help clients (and auditors) work with the new merger accounting rules:
Q: Are BV professionals already seeing some preparation among auditors, CFOs, etc., and not as much pushback?
A: Companies are recognizing that Statement 141(R) may require much more upfront planning in terms of due diligence, scenario analysis, and, potentially, negotiations. Recognizing that the valuation issues related to Statement 141(R) may be especially challenging, many companies are working to address issues prior to a business combination event and are taking steps to involve professionals from various areas of their businesses, including tax, accounting, and mergers and acquisitions. Communication and teaming across internal groups will be particularly important now that there will be pressure to complete the valuation exercise subsequent to the transaction within the quarter that the transaction occurs.
Q: Do you have any suggestions for BV analysts on what they should be doing to get clients ready for 141(R)?
A: Statement 141(R) will compel companies to more fully understand the dimensions of a proposed transaction early in the process and support the valuation and accounting treatments applied to it. Valuation professionals should be helping companies take steps now to meet these new regulatory demands. Companies can benefit from careful forethought to changes the new standard will bring as they develop and pursue their mergers and acquisition strategy. Areas of focus for valuation professionals to provide insight into include: measurement date for securities issued, contingent consideration, acquisition costs, acquisition of less than 100 percent, pre-acquisition contingences, selling and exiting costs, in-process research and development, and negative goodwill.