Accounting Management of Business Combinations
Accounting management of the legal and accounting process whereby two or more companies combine their respective assets and shareholders into a single company, either newly incorporated or pre-existing.
TECHNOLOGY DESCRIPTION
The accounting treatment of a business combination must be carried out using the acquisition method (NRV 19 of the Spanish General Accounting Plan). This requires:
- Identifying the acquiring company.
- Determining the acquisition date.
- Quantifying the cost of the business combination.
- Recognising and measuring the identifiable assets acquired and liabilities assumed.
- Determining the amount of goodwill or, where applicable, the negative difference.
From an economic perspective, the calculation of the value of the shares for the purposes of the merger and the determination of the number of shares to be issued by the acquiring company to remunerate the shareholders of the acquired company are particularly important. The operations to be carried out are:
- Calculation of the real value, or fair value, of the assets and liabilities of the companies involved in the merger (real net assets).
- Calculation of the real value of the shares of the merging companies.
- Calculation of the number of shares to be issued by the acquiring company.
Finally, the corresponding accounting entries must be made in the acquiring or absorbing company and the acquired or absorbed company.
TECHNOLOGY APPLICATIONS
The knowledge offered can be applied to SMEs and large companies in any economic sector.
Although a business combination is a complex process involving lengthy negotiations between the parties concerned, it may be an appropriate strategy for companies in a range of scenarios. For example, companies seeking to address financial risk situations, reduce competition or strengthen their position in the market, enter new markets, gain access to other technologies, etc.
In addition to negotiations and legal proceedings, companies will need to carry out the corresponding accounting entries and management procedures required for the transfer en bloc of the assets and liabilities of the company or companies being dissolved and wound up to a pre-existing company (merger by absorption) or, where applicable, to a newly incorporated company (merger through the incorporation of a new company).
ADVANTAGES AND INNOVATIVE ASPECTS
We have extensive know-how in the field covered by this offer. In addition to our teaching experience in subjects such as Financial Accounting, Company Accounting and International Financial Reporting Standards across different Bachelor’s and Master’s degree programmes, we have knowledge of the national and international accounting regulations governing business combinations and their practical application. Furthermore, our research focuses on the study of the economic, financial and asset position of companies under different assumptions and in different contexts.
DEVELOPMENT STAGE
Ready for immediate implementation. The knowledge has been consolidated through years of teaching and research experience. The team can immediately act as a strategic consultant or external auditor for valuation and accounting processes.
APPLICATION SECTORS
- Strategic Consulting and Auditing.
- Banking and Financial Sector.
- Companies undergoing expansion or sector consolidation.
- Commercial Law Firms.
PRINCIPAL INVESTIGATOR
Mónica González Morales – Department of Economic and Financial Studies