Delta Mergers

Delta with Northwest which is a larger airline carrier. Delta Air Lines' quarterly earnings announcement contained a glimmer of hope for the airlines sector, as the carrier revealed a significant bump to its forecasted synergies expected to come out of its planned merger with Northwest Airlines. Delta anticipates as much as $500 million in synergies next year, increasing to the full-run rate of approximately $2 billion in annual synergies by 2012. Conversely, the expected integration costs have also been lowered to a projected $600 million, spread over three years as opposed to four. The biggest cost will come from transitioning the two carrier's separate technology systems to a single platform, with additional outlays dedicated to aircraft
The pooling-of-interests method of accounting for mergers will no longer be accepted. Goodwill will no longer be amortized, but evaluated on an annual basis for impairment. Impairment testing will be performed at the reporting-unit level on an annual basis. Impairment must be measured using a two-step approach, requiring institutions to determine fair values for each reporting unit. These changes in accounting for business combinations not only affect future mergers and acquisitions of oil, gas, and energy companies, but also those companies that are currently carrying goodwill on their balance sheets from previous acquisitions. Under the new standard, a company may avoid a charge against net income if they can show that goodwill has not been impaired. The elimination of the annual goodwill amortization charge will improve not only a firm's net income, but also ratios that include assets or net income in their calculation (McCarthy, M., Christian, C., & Douglas, K. S. (2002)). SFAS 141, Business Combinations, and SFAS 142, Goodwill and Other Intangible Assets, materially change the financial accounting for merger and acquisition transactions. Under SFAS 141, the pooling-of-interests method of
The advantages of business combination for acquiree are: competition between and among the companies will be eliminated, which will increase profits. Monopoly in the market can be achieved by eliminating competition. The amount of capital can be increased by combining business which may be benefit for new marketplaces, products and plans. Operating cost can be reduced with buying in a large amount of material (Account-Audit-Finance, (2012). Furthermore, the acquiree can be using intangible asset from acquirer or saving tax. As example of Bank of American established a subsidiary to which it transferred bank – originated loans and was able to save $418 million in quarterly taxes (Baker, R. E., Christensen, T., & Cottrell, D. (2011)). For advantage of acquirer, it has a lager of funds transferring from acquire with less risk of market during operation. As my personal view with business combination, it has advantage for both acquirer and acquiree. The most important is evaluating both parties’profit before