Accounting for M&A, Credit, & Equity Analysts

Introduction
List of Abbreviations
Chapter 1 Equity Method of Consolidation
Introduction
Description of the Equity Method
Tax Considerations When Using the Equity Method
Accounting under the Equity Method—Excess of Cost over Equity Purchased
Accounting under the Equity Method—Intercompany Transactions
Guidance for Applying the Equity Method
SEC Staff Views Concerning the Equity Method
When to Use the Equity Method—Summary
Accounting for Cash Flows from Equity Method Investments
Modeling the Equity Method of Accounting in Projection Models
Chapter Summary
Chapter 2 Minority Interests
Introduction
Minority Interests
Overview of Accounting for Minority Interests
Treatment of Minority Interests for Enterprise Valuation
Forecasting Minority Interests
Treatment of Minority Interests in M&A Transactions
Modeling Minority Interests
Chapter Summary
Chapter 3 Deferred Income Taxes and Income Tax Reporting
Introduction
Basic Principles of Tax Reporting
The First Principle
The Second Principle
The Third Principle
The Fourth Principle
Treatment of Deferred Income Tax Items in M&A Transactions
Modeling Income Taxes in Projection Models
Calculating the Provision for Taxes—Detailed Calculation
Chapter Summary
Chapter 4 Deciphering the Deferred Tax Footnote
Introduction
Financial Statement Disclosure for Income Taxes
Reconstructing Deferred Taxes on the Financial Statements
Problems with Ratio Analysis
Valuation of Deferred Tax Items
Chapter Summary
Chapter 5 Estimating the Tax Basis of a Firm’s Assets
Introduction
Factors Affecting Differences Between Asset’s Book and Tax Bases
Depreciation (or Amortization) Using Different Schedules
Recognizing Asset Impairments
Transaction Fair Value Adjustments
Asset Sales or Deemed Asset Sales
Estimating the Tax Bases of Target Company’s Assets—Known Balance Sheet
Estimating the Tax Bases of Target Company’s Assets—Unknown Balance Sheet
Chapter Summary
Chapter 6 Pension and Other Postretirement Benefits
Introduction
Pension versus Other Postretirement Benefit Plans
Types of Pension Plans
Economic Objectives of Pension Plans
How Pension Plans Work
Net Periodic Pension Cost
Minimum Pension Liability
Pension Benefits Summary
Other Postretirement Benefit Plans
Net Periodic Postretirement Benefit Cost
Effects of Business Combinations
Chapter Summary
Chapter 7 Deciphering the Pension Footnote
Introduction
Pension Benefit Disclosure Requirements
Benefit Obligation Reconciliation
Plan Fair Value Reconciliation
Employer Securities Included in Plan Assets
Net Periodic Benefit Cost Disclosure
Funded Status and Unrecognized Items
Rate Disclosures
Health Care Disclosures
Chapter Summary
Chapter 8 Analyzing the Firm’s Pension Cash Flows
Introduction
Estimating Future Funding Cash Flows
Employer Company’s Plan Assets and Liabilities in an Acquisition
Plan Liquidation Values
Chapter Summary
Chapter 9 Employee Stock Options
Introduction
The Intrinsic Valuation Method
The Fair Value Method
Evaluating the Firm’s Inputs to the Option-Pricing Model
Tax Effects of Employee Stock Options
Calculation of Diluted Earnings per Share for Companies Expensing Stock Options
Accounting for Target Stock Options Rolled Over in a Purchase Acquisition
Projecting Earnings Per Share (EPS) for Option-Intensive Firms
Chapter Summary
Chapter 10 Restructuring Charges
Introduction
FASB’s New Changes to Financial Accounting for Restructuring Charges
Restructuring Charges—U.S. GAAP
Restructuring Charges—International Accounting Standards
Disclosure of Restructuring Charges
Restructuring Liabilities in Business Combinations
Chapter Summary
Chapter 11 Discontinued Operations
Introduction
How Results of Discontinued Operations Impact Earnings from Continuing Operations
Sources of Classification Bias
Criteria for Classifying Items as Discontinued Operations
The Operations Being Discontinued—Component of a Business
Disposal Criteria
International Accounting Treatment of Discontinued Operations
Chapter Summary
Chapter 12 Net Operating Loss Deductions
Introduction
Net Operating Loss Deductions
Other Tax Considerations Relating to NOLs
M&A Considerations Relating to NOLs
NOL Effects on Financial (GAAP) Reporting
Valuation Considerations
Modeling NOL Carrybacks and Carryforwards
Chapter Summary
Chapter 13 Purchase Accounting for Business Combinations
Introduction
Purchase Accounting Basics
Calculating Target Company’s Net Identifiable Assets
The Net Identifiable Assets Calculation
Calculating the Purchase Price
Transaction Fees
Fair Value of the Consideration Given
Calculating Goodwill
Negative Goodwill
Amortization of Goodwill
Accretion and Dilution of Earnings
Pro Forma Presentation (as If Combined)
Statements of Cash Flows Following Business Combinations
Limitations on the Use of Target Company’s Net Operating Loss (NOL) Carryforwards
Effects on Minority Interests in Business Combination Transactions
Chapter Summary
Chapter 14 Deemed Asset Sales under IRC Sections 338(h)(10) or 338(g)
Introduction
Overview of the Section 338(h)(10) Election
Benefits of Section 338(h)(10) Sales
Determining the Sale Price for a Section 338(h)(10) Election
Modeling Section 338(h)(10) Transactions
Chapter Summary
Glossary
Endnotes
Index