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Carryover method of accounting is used when there is a merger of two or more non-profit entities into a new entity. Their assets and liabilities are merged and come into effect on the date of merger transactions.Following adjustments are required in carryover method accounting −Modifications of contracts − Alters terms and conditions of contract.Reclassifications − If companies are using different accounting methods, adjustments for consistent accounting methods are required.Intra entity transactions − If there are any prior transactions between merged companies, those are removed from merged assets, liabilities and net assets.Assets like internally developed intangible assets and other liabilities are ... Read More
In merger and acquisition, to acquire the records of the events under acquisition method consists of the following steps −Measure of tangible assets and liabilitiesAcquirer measures tangible assets and liabilities at market fair value on acquisition date (date at which he gains control). Some assets like lease, insurance contracts etc. are measured on inception date. Third party firms will do the valuation or fair market analysis.Measure of intangible assets and liabilitiesIt is a more difficult task than measuring tangible assets and liabilities because acquirers don’t have any record of most of the items in the balance sheet. If they were ... Read More
Either two or more companies merge or a company acquires another. In either of the processes, one company purchases another company asset for the union of their business. Accounts are maintained for these transactions.Accounting for merger and acquisition transactionsIdentification of business combination− To achieve some synergy form.Identification of acquirer − Governs financial and operating policies of combined business entities.Entity having greater fair value, likely to be an acquirer.Management who are dominating in deals, likely to be an acquirer.Entities who are giving up cash/other assets, likely to be acquirers.Cost of transaction measured − Fair values (at the time of acquisition) + ... Read More
A company is a business organization which is associated with persons and set up with an aim of undertaking a business. It is governed by Companies Act 2103. Whereas a corporation is a corporate body registered outside or within a nation.In simple words a company is suitable for small entities or businesses whereas a corporate is suitable for bigger entities or businesses.CorporationA corporation is a body which is incorporated inside or outside the country but excludes corporation sole or any corporation which is formed by official gazette notification by the central government.Corporation is defined in Indian companies Act 2013, section ... Read More
We can say a businessman walks in a defined path and an entrepreneur makes his own path and a businessman can follow the path defined by an entrepreneur. In general many people think that both businessman and entrepreneur have similar or same meaning but they differ in their own way.BusinessmanA businessman is a person who carries out the activities related to industrial and commercial purposes. He runs the existing business and can set up new entrants for existing business in the market. Generally businessmen go for ideas which generally make profit and huge demand in the market.Businessmen face tough competition ... Read More
In simple words, the word restructuring means any changes in a company. Generally the word restructuring in the corporate world is used in economic downturns. One should have a good understanding about the restructuring process before going for it.ReorganizationIt is a clause in company charter which provides guides to merger and acquisition, change in ownership at corporate level, change in assets. Generally, reorganization includes mergers, amalgamations, divestitures, corporate buyouts etc.Usually, the companies go for reorganization to improve their efficiency, to increase their profits, reduce or eliminate financial troubles. Reorganization includes debt payments, restructuring company’s capital structure etc.Some of the reasons ... Read More
Organizational restructuring is a process of reorganizing ownership, operational and other structures of an organization to make an organization profitable. Internal factors or external factors or combination of both are responsible for organization restructuring.If the restructuring helps an organization to develop and grow, then it is called positive restructuring. If restructuring makes an organization stagnant or downfall, then it is called negative restructuring.Internal factorsExternal factorsTo decrease gross margin.New trends in the market.Lack of proper communications.New clients/customers.High cost of operating.Market redefines.Negative cash flows.Labor costs etc.Competitors etc.ReasonsThe reasons for organizational restructuring are as follows −Change in nature of business according to market ... Read More
Financial restructuring is a process of reorganizing companies’ financial structure. Companies’ financial structure consists of both debt and equity capitals. Reorganizing financial structure can be from the asset side or liability side of the balance sheet.Equity restructuringIn this restructuring, equity capital is reorganized by reshuffling shareholders’ capitals and reserves in the balance sheet. It is a complex process, as it involves law.MethodsSome of the methods of equity restructuring are as follows −Repurchasing shares from shareholders to reduce liability to shareholders and reduction in capital.Waiving off dues of shareholders.Share capital consolidation.Writing down share capital in appropriate accounting entries.ReasonsThe reasons of equity ... Read More
Financial restructuring is a process of reorganizing companies’ financial structure. Companies’ financial structure consists of both debt and equity capitals. Reorganizing financial structure can be from the asset side or liability side of the balance sheet.Debt restructuringIn this process, the debt capital of the company is reorganized by reorganising the items in the balance sheet. It is used as a company financial tool rather than equity restructuring because, financial manager looks to minimize the cost of capital by improving efficiency.Ways of debt restructuring are as follows −Change in debt part by using the market opportunities by low cost borrowings.Increase in ... Read More
To fund a merger and acquisition, the source of capital is required. To attain those funds is a complex thing because; it requires a lot of variations and combinations. Proper planning is required to get the capital for merger and acquisition. With various alternatives available, a proper mix is selected to get the low cost of capital.TypesThe types of acquisition financing are as follows −Stock swap − Acquirer exchange stock with the targeted company.Equity − Acquiring companies targets the companies which operate in an unstable industry with uneven cash flows.Cash − Takes place if an acquired company has smaller/low cash reserves.Debt − Banks ... Read More