Australian Requirement for Business Combinations
Australian Requirement for Business Combinations
Abstract:
The issue of accounting for Business Combinations, according to Australian standards, has been a cause of considerable concerns and controversies for both, accountants and academics. However, due to the enormity of transactions involved in it, it becomes highly important to understand its application. In this research, we will outline various concepts and definitions to business combinations and address some important issues such as reporting entity concept, determination of fair value of assets, nature and treatment of goodwill, fair value approach in determining the cost of business combinations. While doing this, we will keep in mind the major accounting practices applied for various issues related to Business Combinations in Australia.
Introduction:
‘Growth’ is the main objective of any business organization. Top management always triggers growth or expansion as their primary goal. A company may grow slowly, gradually expanding its product lines, facilities or services, or it may unexpectedly shoot up overnight. Some managers consider growth so important that they say “a company must either grow or die”. In past hundred years in US and Australia, many companies have achieved their goal of expansion through business combinations. Such expansion can be of two types: 1) Internal expansion 2) External expansion
A firm can expand internally by expanding its research and development.
External expansion is when a business tries to expand by acquiring one or more other firms. This is also termed as Business Combination or Mergers or Acquisitions. This form of expansion is more popular over recent years, as it attracts rapid attention and growth. In addition to this, external expansion holds comparatively higher advantages as compared to internal expansion.
Definition of Business Combination:
Business Combinations are events or transactions where two or more business enterprises,
Abstract:
The issue of accounting for Business Combinations, according to Australian standards, has been a cause of considerable concerns and controversies for both, accountants and academics. However, due to the enormity of transactions involved in it, it becomes highly important to understand its application. In this research, we will outline various concepts and definitions to business combinations and address some important issues such as reporting entity concept, determination of fair value of assets, nature and treatment of goodwill, fair value approach in determining the cost of business combinations. While doing this, we will keep in mind the major accounting practices applied for various issues related to Business Combinations in Australia.
Introduction:
‘Growth’ is the main objective of any business organization. Top management always triggers growth or expansion as their primary goal. A company may grow slowly, gradually expanding its product lines, facilities or services, or it may unexpectedly shoot up overnight. Some managers consider growth so important that they say “a company must either grow or die”. In past hundred years in US and Australia, many companies have achieved their goal of expansion through business combinations. Such expansion can be of two types: 1) Internal expansion 2) External expansion
A firm can expand internally by expanding its research and development.
External expansion is when a business tries to expand by acquiring one or more other firms. This is also termed as Business Combination or Mergers or Acquisitions. This form of expansion is more popular over recent years, as it attracts rapid attention and growth. In addition to this, external expansion holds comparatively higher advantages as compared to internal expansion.
Definition of Business Combination:
Business Combinations are events or transactions where two or more business enterprises,
References: Dagwell, R., Wines, G., Lambert, C., (2007) Corporate Accounting in Australia (4th edition) University of New South Wales Press, Sydney. CPA Australia (2007) Accounting Handbook, Pearson Education Australia, French Forest: · Australian Accounting Standard Board AASB 3 – Business Combinations Williams, J., Carcello, J., (2006) GAAP Guide Level A (2007) Restatement and Analysis of Current FASB Standards, CCH. Reporting requirements for non-reporting entities: ASIC Information Release (Issued on: 20 July 2000) Website: www.aasb.com.au/public_docs/aasb_standards/AASB1025_7-91.pdf Acquisitions and Goodwill – First Time application of Accounting Standards, Abstract 34 by Urgent Issues Group (June 2000) retrieved from Website: www.aasb.com.au/public_docs/abstracts/ABS34_6-00.pdf Fair Value of Equity instruments issued as Purchase Consideration Abstract 41 by Urgent Issues Group (September 2001) retrieved from Website: Accounting for Goodwill AASB 1013 (June 1996) retrieved from Website: www.aasb.com.au/public_docs/aasb_standards/AASB1013_6-96.pdf Sundararajan, V., (1995), Accounting for Goodwill retrieved from <http://home.att.net/~s-prasad/GW.htm> Barlev, B., Haddad, J., Fair Value Accounting and Management of the Firm (2002) Jerusalem, Israel retrieved from <www.sciencedirect.com>