Question: Investigate a significant acquisition made by a U.S. publicly-traded company that was COMPLETED (not just announced) between January 1, 2021, and December 31, 2022.
24 May 2023,4:17 PM
Investigate a significant acquisition made by a U.S. publicly-traded company that was COMPLETED (not just announced) between January 1, 2021, and December 31, 2022. Prepare a brief essay that addresses all of the following points:
• Describe the two companies involved. Are they from the same or different industries? Is this a horizontal acquisition, vertical acquisition, or conglomerate acquisition? (Note that these categories are not mutually exclusive).
• When was the deal announced? When was the deal completed?
• What was the acquiring firm’s purpose and rationale for the merger? How does management of the acquiring firm see the acquired firm fitting in with the strategic vision and acquiring firm’s future?
• How did the market react to the acquisition when it was announced, in terms of returns and trading volume, as well as general sentiment? How has the acquiring firm’s stock performed since then?
• If the company being acquired was publicly traded, how did the acquired company's stock price react when the deal was announced? What was the pattern of the acquiree's stock price up to the point where the deal closed?
• How much did the acquiring company pay for this acquisition, and what was the consideration that the acquiring firm used as payment (stock, cash, etc.)?
• Was there any contingent consideration associated with this deal?
• What was the allocation of the consideration paid for the merger in terms of assets acquired and liabilities assumed? You should be able to find this in the notes to the financial statements. As best you can, attempt to reconstruct the journal entry that the acquiring company would record if it had been a direct asset acquisition.
• Based on the research you have done for this acquisition, what is your overall evaluation of this acquisition, and how will it impact the future of the acquiring company? If you were on the Board of Directors of the acquiring company, would you support or oppose this acquisition? If you were a shareholder of the acquired company, would you vote for or against being acquired?
Part 2 (30%)
Investigate a significant goodwill impairment writedown by a U.S. publicly-traded company that took place in a fiscal year that ended after January 1, 2021. The company you investigate here must be different than the companies you investigated in Part 1. Prepare a brief essay that addresses the following points.
• What did the existing goodwill relate to? To which business segment was the goodwill allocated?
• How much goodwill was impaired, in dollar terms?
• In which fiscal quarter did the goodwill impairment take place? If the impairment took place in fiscal quarters 1, 2, or 3, how large is the goodwill impairment relative to the company’s net income and revenue that quarter? If the impairment took place in fiscal quarter 4, how large is the goodwill impairment relative to the company’s net income and revenue for that fiscal year?
• What was management’s rationale for the goodwill impairment charge?
• What were the various factors that management evaluated in deciding to take this goodwill impairment charge? Was there anything about the recent pandemic that made this goodwill impairment charge especially necessary?
• In the company’s press release announcing earnings for the quarter in which the goodwill impairment charge was taken, did the company report pro forma earnings numbers? Was the goodwill impairment excluded from the pro forma earnings?
Part 3 (15%)
As we discussed in class during Week 1, during the previous time I taught this course, the FASB was considering changing goodwill accounting, in response to pressure from companies. In particular, the FASB was considering going back to goodwill amortization for public companies (private companies have this option), as existed prior to the issuance of SFAS 141 and SFAS 142 in 2001. Since then, however, the FASB has removed this project from its agenda, so it appears that goodwill amortization is not coming back soon. However, goodwill accounting will still continue to be controversial.
Consider four possible ways to account for the goodwill arising from an acquisition:
[1] Periodic amortization over the estimated period during which the goodwill from the acquisition is expected to provide benefits to the acquiring company. This was the regime that existed prior to issuance of SFAS 141 and SFAS 142 in 2001.
[2] Indefinite life and no amortization, with impairment testing performed at least annually (or more often when circumstances suggest impairment). This is the regime that exists now.
[3] Expense the goodwill at the time of acquisition. This is what businesses were lobbying for leading up to the FASB’s issuance of SFAS 141 and SFAS 142 in 2001.
[4] Implicitly recognize the goodwill by proportionately increasing the value of other specific assets acquired (and, possibly, decreasing the value of specific liabilities assumed). This has been proposed from time to time but the idea has never gotten much traction.
Prepare a brief response that offers your opinion on the following questions.
• What are the pros and cons of each approach?
• Did the FASB make a mistake in abandoning its goodwill project? Should the FASB stay with the current goodwill regime, or should it change the accounting for goodwill?
• Which of the above four approaches do you find most compelling and why? The least compelling?
Part 4 (15%)
Read this August 17, 2018 tweet by former U.S. President Donald Trump: https://twitter.com/realDonaldTrump/status/1030416679069777921
• What are the pros and cons for financial statement preparers and financial statement users that would come with moving from a quarterly reporting cycle to a semi-annual reporting cycle?
• How frequently are publicly-traded companies in other countries required to report financial statements? Give some examples. How does this compare with the rules in the United States?
• What do you think? Should the SEC move from a quarterly to a semi-annual (or even annual) reporting regime for publicly traded companies?
For this question, you may find it helpful to consult your textbook Chapter 13, p. 689-703, which discusses interim reporting and quarterly 10-Q filings.
This writing assignment has four parts. Your submitted work product should be in a coherent, self-contained essay style; do not submit a simple bullet list of responses to the below questions. Your total essay length should be between 2,000 and 3,000 words (not including references or any figures, exhibits, etc.). The proportion of your submitted work product devoted to each of the four parts should roughly correspond to the grade weight percentages indicated.
Parts 1 and 2 ask you to investigate and analyze a recent business acquisition and recent goodwill writedown by a publicly traded company. For these, you should consult both primary and secondary sources when researching your acquisition and goodwill writedown.
Parts 3 and 4 ask for your opinion on two contemporary accounting controversies: goodwill amortization, and reporting frequency for public companies. There is no right or wrong answer: I am more interested in your thought process rather than which side of a controversial topic you take. For these questions, you should find discussion and commentary on these topics (plenty of strong opinions on all sides of these controversies can be found online), and use these in support of a logical and coherent argument for your position. Carefully and in good faith consider the arguments against the position you take, and explain why you feel your position is ultimately more compelling. Again, consult both primary and secondary sources as necessary.
Primary sources might include (but are not limited to):
• Relevant SEC EDGAR filings by the companies involved (e.g., the 10-K and 10-Q of the fiscal periods in which the acquisition or goodwill writedown took place, as well as any relevant 8-Ks).
• Transcripts of conference calls between company management and analysts. You can obtain conference call transcripts from websites like Seeking Alpha, Motley Fool, and others. • The Investor Relations section of the relevant company’s website.
• Interviews with company management.
• Press releases, social media postings, or other statements made by the company or its executives.
• Statements issued by the SEC, FASB, IASB, AICPA or other such governmental, regulatory, standard-setting, or professional organizations.
Secondary sources might include:
• Analyst reports written about the companies involved.
• Articles in the business press about the companies involved. • Media commentary related to the matters at hand.
• Anything else of relevance not coming from the companies or other pertinent individuals or organizations themselves, that are from reputable sources.
At the end of your essay, include a reference list of works consulted, using a proper citation format (e.g., MLA, APA, Chicago, etc.). This reference list does not count towards the length requirements. I have no preference as to whether you use in-text citations.
Expert answer
This Question Hasn’t Been Answered Yet! Do You Want an Accurate, Detailed, and Original Model Answer for This Question?
Ask an expert
Stuck Looking For A Model Original Answer To This Or Any Other
Question?
Our skilled experts only need your instructions and deadline to help you produce an original and flawless paper.
Place Order Now
Customer ID: 100351