Advisory services relating to the conversion of financial accounting as part of transactions

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Mergers and acquisitions (M&A) are one of the most important strategies for growth in existing markets or for developing new markets. However, the integration of reporting by the acquired companies represents a difficult exercise for the acquirer.

The challenges involved start with reporting the company acquisition in the balance sheet in accordance with the requirements of International Financial Reporting Standards (IFRS). As a rule, acquired companies are required to draw up interim financial statements at the date of acquisition as a basis for the purchase price allocation.

Accounting and valuation questions have to be clarified for the purchase price allocation. These include:

  • Interaction of segment reporting, goodwill allocation and future impairment tests,
  • Deferred taxes in connection with the transaction,
  • Replacement of stock option plans by the acquirer,
  • Reporting of pension accruals and similar items,
  • Identification of previously non-reported risks and contingent liabilities.

A shorter period for the reporting process often results in companies being faced with the difficult task of being able to provide the figures in time

If the acquiree does not currently report in accordance with IFRS, its reporting will have to be converted to IFRS. If the target already reports in accordance with IFRS, it will be necessary to determine which areas will have to be adapted to the acquirer's individual accounting guidelines according to IFRS as a result of deviations in exercising optional rights (for example quota or at-equity consolidation) and accounting methods (for example capitalization of self-generated development costs).

Acquired companies also have to be integrated into the acquirer's ongoing financial accounting reporting which follows the initial consolidation. As there are only a few weeks between an acquisition and the first quarterly balance sheet, acquired companies generally have to be quick in filling out new reporting packages. This is made even more difficult where there is a lack of IFRS expertise. In addition, the acquired companies often have to be brought into line with the faster time schedule for the preparation of financial statements. A shorter period for the reporting process often results in companies being faced with the difficult task of managing to provide the figures in time. Furthermore consideration should also be given to whether a company's resources are adequate for processing all questions in time and in the necessary quality.

PwC assists with the presentation of mergers and acquisitions in company accounts

Following a merger or acquisition, the interaction of technical and organizational aspects, together with a time schedule that is often very tight, leads to risks in the reporting process. PwC has the tried-and-tested methods, local experts and global experience necessary for the pragmatic and efficient integration of acquired companies. PwC draws up a solution, together with the client, that is tailored to the client's specific needs. PwC's specialists help with the presentation of the merger or acquisition in the balance sheet and with the alignment of reporting with the requirements of the acquirer.

As a result of PwC's tried-and-tested project management approach, experts work together with the client to fulfil the demands that arise as a result of the interwoven topics of a transaction (such as valuation, planning, taxes, IT systems, accounting, treasury).

With their know-how and interdisciplinary approach, PwC specialists assist companies with all questions that do not arise in the day-to-day business. They take the burden off a company's resources and contribute to the successful integration of acquired companies. This places companies in the position of being able to achieve a speedier realization of the expected synergy from the transaction.