Post-Acquisition Issues

Question 1

What is the biggest post-acquisition issue?

Answer 1

Measurement adjustments (timing differences)

Question 2

How long does a company have to re-adjust the measurement of their investment accounts and assets?

Answer 2

One year after the acquisition date, during that period you can true up the value the assets and non controlling interest and consideration transferred.

Question 3

How do you treat a change in estimate AFTER the measurement period?

Answer 3

All treated prospectively

Question 4

If you assume contingent liabilities in a combination and that fair value changes, how do you adjust? (within the one year measurement period)

Answer 4

Higher of:

• Acquisition date fair value or
• Amount recognized under ASC 450

Lower of:

• Acquisition date fair value
• Best estimate of future settlement amount

Question 5

Can you make adjustments to contingent consideration beyond the one year period?

Answer 5

Yes. The adjustment will be to the liability or equity. If equity, do not remeasure; adjust equity elements when contingency is settled. If it is asset or liability, you adjust to fair value and the gain or loss will be recognized in earnings.