A Research On Some Financial And Accounting Issues In Enterprise M&A

Merger and Acquisition, an important means to promote the circulation of property, to act asset quantity and to improve the disposition of social resource. In china, as the frequency of mergers has increased, so has the controversy surrounding merger and acquisition. One of the main motives for this study is to contribute to the heated debate about appropriate accounting for merger and acquisition within the accounting profession, especially in China where the accounting regulation with respect to the treatment of merger and acquisition is rather permissive.In this study, some relevant financial and accounting issues in the area of merger and acquisition are addressed, which consist of following three points:Part 1: Outline-what is merger and acquisition. Firstly, several terminology of merger and acquisition is defined and explained. Such as merger, consolidation, take over. Secondly, This section describes the different types of merger and acquisition, The type of merger and acquisition is constrained by law, taxation, industry discrepancy and so on, so it can be classified according to different standards. For example, according to related industry, it can be classified as vertical merger, horizontal merger and mixed merger, According to payment type, it can be classified as merger of purchasing asset with money, merger of purchasing stock with money, merger of barter stock for asset, merger of barter stock for stock. As for the standard in law, it can be divided into absorbing merger, startup merger and control merger. Thirdly, this section discuss the motivation of merger and acquisition, including the theory of efficiency, the theory of supply cost, the theory of undervalue, the theory of market possess, the theory of profit reassign. Finally, this section discusses which type of merger and acquisition can be chosen in China.Part 2: Comparison and Analysis of the two methods in merger and acquisition. It is the key part of the theory in this paper. A. This section discusses the purchase method and some accounting issues. Under a purchase, the deal is considered as an acquisition of one company by another, the acquirer records the net assets acquired at the fair value on the market. Any excess of themethod and some accounting problem. Pooling of interest accounting comes into play when two corporate entities combine by exchanging their existing voting stock. Typically no cash changes hands, under the pooling of interest concept, the transaction is generally viewed not as a purchase or sale, but as a merger of two companies that consolidate their assets at book value. No goodwill results from the combination, the use of the pooling accounting method generally allows the acquiring company to report higher earnings immediately after acquisition, because the target's original accounting costs, less accumulated depreciation, usually are significantly lower than the current fair market value of the target's assets, Similarly, for subsequent periods, pooling allows the purchaser to avoid depreciating, or reducing from reported income, the full value of the acquired company, and thus to report higher earnings than would be yielded by the purchase method. C. The difference in the purchase method and the pooling of interest method. D. Why the pooling of interest method isn't popular in china.Part 3: The issue of goodwill. A. Definition of the goodwill. Goodwill is the difference between the combined company's profits over normal earnings for a similar business. B. The measurement of the goodwill and accounting treatment are discussed in this section. Theoretically, there are many measure method for the goodwill, for example, there are Capitalization of Income method, Present Value of Super-Profit method and so on, but we adopt the Difference between thb C t of the whole Business and the Identifiable Net Assets method. The goodwill may be treated in three manners: The Write-off approach, the Capitalization approach and the No-Amortization approach. C. The measurement of the negative goodwill and a...