US accounting regulations 'could affect merger value'

News Article - 16 January 2008
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New US accountancy regulations released over the last month could affect the structure and timing of mergers, according to CFO.com.

The financial website reports that companies following US Generally Accepted Accounting Principles (GAAP) may have to rethink their equity contributions, share-price restrictions and transaction deadlines.

Following the release of the US Financial Accounting Standards Board Business Combinations rule, buyers must value the amount of a firm on the day the transaction closes, rather than the day the deal is formed.

However, John Formica, partner at PricewaterhouseCoopers, explained that as some transactions can take up to a year, the new rule could mean that some businesses' stock falls massively in this time.

Barry Smith, managing director of SMART Business Advisory and Consulting, remarked that there may be a sharp increase in mergers and acquisitions, as firms rush to do deals before the compliance deadline.

The US Securities and Exchange Commission has recently announced it will allow foreign-based companies with listings in the US to file their accounts under International Financial Reporting Standards rather than GAAP.

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