Select two public companies who have undertaken an acquisition of a subsidiary within the past three years. Use publicly-available information on the companies, such as annual and quarterly reports, company websites, and investor presentations to research the impact of the acquisitions on both the companies’ financial statements and on their underlying business. The target word length of the paper is 3,000-5,000 words (excluding exhibits).
Your paper should cite all sources used (Bibliography, end notes). Please attach copies of relevant extracts of materials used (e.g. relevant pages from annual reports).
The paper should include a discussion of the following for each of the two companies selected.
Details of company acquired (10 marks)
Purchase consideration (amount and nature)
% ownership acquired
Date of acquisition
Was the acquisition done in multiple steps or all at one time?
Allocation of acquisition differential (10 marks)
What was the amount of the acquisition differential?
What was it allocated to?
How is it being amortized?
Have there been any goodwill impairment losses or other acquired asset impairment losses reported since the acquisition?
Accounting Policies (10 marks)
GAAP followed by the company (ASPE, IFRS ,US , Other)
What does the company disclose regarding its accounting policies for investments in subsidiaries and other investees?
What disclosures has the company provided regarding the timing and expected impact on their financial statements of conversion to IFRS , if applicable or use of global accounting policies (non-Canadian companies)
MOS 4465A – HAND-IN ASSIGNMENT (continued)
Impact of Acquisition on Financial Statements: (20 marks)
Impact on balance sheet in year of acquisition
Impact on income statement in year of acquisition
Impact on cash flow statement in year of acquisition
Has the acquisition impacted the company’s exposure to foreign currencies (e.g. revenues/expense streams in foreign currencies, investment in foreign operation)?
Note Disclosures on Acquisition: (10 marks)
Do note disclosures pertaining to the acquisition meet Handbook disclosure requirements for business combinations?
Have pro-forma financial statements been provided?
Strategic Rationale for the Acquisition: (20 marks)
Reason why company was acquired
Likely impact on future operations and profitability of company
Conclusion: (25 marks)
Your paper should conclude with a comparison of the acquisitions made by each company to one another. This should include the following points:
Which company’s acquisition is likely to have the most significant impact on the consolidated entity (e.g. size, scope of operations)?
Has one company provided better quality financial statement information regarding the acquisition than the other?
Which company’s acquisition do you believe is more likely to create value for the shareholders of the parent company / acquired company?
To support your analysis and conclusion, your exhibits should include the following:
(1) vertical common-size income statement and balance sheet for the year/period before the acquisition and the year/period after acquisition
(2) horizontal common-size income statement and balance sheet for the year/period before the acquisition and the year/period after acquisition
(3) A minimum of 3 select ratios for the year/period before the acquisition and the year/period after acquisition
