Business Combinations Research Articles

The Impact of Accounting Measurement on the Financial Reporting

This article provides an in-depth discussion of the impact of accounting measurement on financial reporting. After confirming the centrality of accounting measurement in financial reporting, the article analyses the impact of accounting measurement on corporate financial reporting in four accounting items: intangible assets, R&D, goodwill and pensions. The study points out that the assessment of enterprise value and stability can be significantly affected by improper measurement of intangible assets. Accurate R&D accounting measurement is essential for financial report users to reveal the true value and potential earnings of a business. Goodwill arises mainly from accounting for business combinations or mergers and acquisitions, and accurate measurement is an important basis for business risk assessment and strategic planning. Pension accounting measurement affects the prediction of future cash flows of enterprises, and therefore has an impact on the users of financial reports, especially on investors. This paper demonstrates, through five case studies, the use of accounting measures for the above four accounting subjects in actual financial reporting and their specific impact on decision makers. In conclusion, the accuracy of accounting measures plays an indispensable role in improving the transparency and comparability of financial reporting and can have a decisive impact on the decisions of investors and other stakeholders.

GENESIS OF THE CONCEPT OF «GOODWILL»

Goal. The problem of defining the essence of goodwill lies in its complex and multifaceted nature. Goodwill formation occurs constantly, but as a fully-fledged accounting object, disclosed in consolidated financial statements, it arises during business combinations. Various stakeholders have subjective perceptions of goodwill, complicating its definition, evaluation, and accounting. The relevance and purpose of the research lie in the necessity of formulating a comprehensive approach to understanding the essence of goodwill, considering its etymology, analysis of domestic and foreign contemporary and historical sources, existing approaches to interpretation, and highlighting key categories. Method. The research utilized methods of systemic analysis, synthesis, comparison, systematization, analogy, and generalization. Results. The global economy witnesses an increase in the value of intangible assets and goodwill. The change in the dominance of approaches to understanding the essence of goodwill, analysis, and systematization of existing sources allowed identifying that for the current stage of development of this concept, the recognition of its complexity and diversity is characteristic. This necessitates the identification of key components of goodwill, analyzing their role in business value management, brand value enhancement, and capital accumulation. The main focus is on using goodwill to measure consumer trust, shape the company's reputation, and assess its performance. The proposed comprehensive definition of goodwill as a special intangible asset that reflects the added value of the business, potential for future income generation, shaped by the interaction of components such as reputation, brand, recognition, image, corporate style, customer loyalty, corporate culture, technological advantages, customer base, trade secrets, know-how, research, development, innovation, patents, licenses, copyrights, government grants, partnerships, competencies, managerial qualities, social and environmental responsibility, collectively providing business with competitive advantages, investment attractiveness, and contributing to its successful operation. The proposed definition will most fully account for the key components of goodwill expression and generation, helping to comprehensively understand its essence and positively impact the market capitalization of the business. Practical significance. Correct understanding of goodwill is important for accurate assessment, completeness of disclosure in consolidated financial statements, and for effective management and justification of investor decisions.

PERUBAHAN KOMBINASI BISNIS: IMPLEMENTASI DAN DAMPAK PSAK 22 TERHADAP KINERJA KEUANGAN PERUSAHAAN

This article examines the implementation of business combination accounting before and after the implementation of PSAK 22, now known as PSAK 103 on Business Combinations, with a literature study approach. This study evaluates the effect of PSAK 22 on the company's financial performance through the analysis of Return on Assets (ROA), Return on Equity (ROE), and profit margin. Before PSAK 22, companies usually used the “pooling of interest” or “purchase method”. Analysis from previous studies shows that business combinations have a significant effect on ROA, ROE, and profit margins. While mergers and acquisitions often improve financial performance, the results vary across sectors. This article aims to serve as a reference for further research on business combinations with PSAK 22/103, and requires a wider range of case studies and more diverse variables.

Are SPACs a good investment deal for investors? A performance comparison between SPACs vs IPOs

PurposeSPACs are reshaping the world of digital entrepreneurial finance. Firms in the digital sector often need access to public markets for long-term competitiveness. SPACs offer a viable solution for these entities to collect capital and transition to public ownership quicker than IPOs. In this context, the paper aims to analyse and compare the performance of SPACs with those of IPOs in the post-business combination phase. The objective is to provide novel insights into the determinants of SPAC operating and market performance by considering firm-specific and deal-specific characteristics and the broader implications of market uncertainty.Design/methodology/approachThe analysis applies univariate and multivariate OLS regressions to a sample of 96 SPACs to investigate the drivers affecting SPACs' performance vis-a-vis IPOs.FindingsThe study finds that SPACs underperform the matched group of IPOs on both operating and stock market performance (buy-and-hold strategy). The time to execute a business combination negatively correlates with SPAC performance, and proximity to the 80% deal threshold negatively affects share price performance and EBITDA margin.Practical implicationsThe objective is to offer insights for institutional investors to effectively select prime targets within the SPAC framework.Originality/valueThis study strengthens the findings related to the drivers influencing the long-term performance of SPACs that were previously identified in prior research.

Perubahan Kombinasi Bisnis Implementasi Dan Dampak PSAK 22 Terhadap Kinerja Keuangan Perusahaan

Using a literature research methodology, this paper investigates how business combination accounting was implemented both before and after PSAK 22, which is now known as PSAK 103 on Business Combinations. This research analyzes profit margin, return on equity (ROE), and return on assets (ROA) to assess the impact of PSAK 22 on the business's financial performance. Prior to PSAK 22, businesses often employed the "purchase method" or "pooling of interest." Results from prior research indicate that ROA, ROE, and profit margins are significantly impacted by business combinations. Although financial performance is frequently improved by mergers and acquisitions, the outcomes differ among industries. This article requires a broader range of information in order to function as a reference for future study on business combinations with PSAK 22/103 case studies and more diverse variables.

Analisis Perbedaan Penyusunan Laporan Keuangan Konsolidasi pada Perusahaan di Indonesia dengan Konvergensi IFRS dan PSAK 22

The purpose of this study is to determine how IFRS 22 and IFRS 3 differ from each other with respect to business combinations as they relate to the compilation of consolidated financial statements for Indonesian companies. Because this strategy gives researchers an idea of how the topic of debate has evolved, a qualitative method that uses a review literature approach is the type of method used. Secondary data that has been examined to generate a description of the research topic is the source of the data used. The study shows that IFRS 22 and IFRS 3 differ in several areas, including the presentation of long-term liabilities that must be refinanced, minority interest rate requirements, disclosures in financial position statements, and financial statement components. Consolidated financial statements based on IFRS number 3 and PSAK number 22 must be prepared for the combination of companies. Guidelines for reporting consolidated financial statements for companies with subsidiaries are listed in PSAK number 22. Guidance on the accounting treatment of corporate purchases is provided by IFRS 3. The components of the financial statements, the disclosures in the statement of financial position, the term minority interest, extraordinary headings, and the reporting of long-term liabilities to be refinanced are where PSAK 22 and IFRS 3 differ. It is important for all businesses to have a comprehensive understanding of the relevant guidelines and regulations to guarantee the accuracy and compliance of consolidated financial statements with such accounting standards. It is important to speak with a qualified financial advisor or professional accountant if further details or a more thorough explanation are needed.

THE ROLE OF SOCIAL MEDIA-ADVERTISING IN THE DEVELOPMENT OF GEORGIAN COMPANIES

Guliko Katamadze E-mail: qatamadze.guliko@bsu.edu.ge Associated Professor, Batumi Shota Rustaveli State University Batumi, Georgia https://orcid.org/0000-0002-5198-3890 Abstract . The use of social media advertising as a means of marketing communication is gaining strategic importance for companies operating in Georgia. Social media-advertising research is all the more relevant for those firms that are trying to deliver a marketing "message" to a wide audience with minimal costs and brand positioning in the market. The relevance of the problem is determined by the fact that the influence of social media advertising on the development of Georgian companies, their branding process and the effectiveness of the returns received from the investment of their marketing activities has not been properly studied. The purpose of the research is to develop the best mechanism for using social media advertising for companies operating in Georgia, to determine the most favorable form for use as a marketing communication tool based on user behavior. Methods of data collection and observation were used to develop the paper. We used the collection method to assess the possibility of using social media advertising by companies operating in Georgia, and the observation method - to determine the potential of their social media space, based on which the possibilities of increasing the effectiveness of companies through social media advertising were identified. As a result of the research, it is clear that Georgian companies use social media advertising to improve their brand, to attract a new target audience. Social media advertising has a strategic importance in increasing the effectiveness of companies operating in Georgia at all stages of their operation. Accordingly, we can refer to the complex combination of traditional and electronic businesses as a result of using social media advertising, which will help to increase the marketing efforts of companies operating in Georgia and, as a result, their competitiveness and operational efficiency. Keywords: Social media-advertising, marketing effectiveness, social media-space, business. JEL classification: M31, M37

Supporting management decisions for M&A transactions based on the strategic allocation of intangible assets

In the context of mergers and acquisitions (M&A), management decisions regarding asset allocation play a key role in determining the strategic value of intangible assets. This study investigates the allocation of such assets, particularly goodwill, in relation to enterprise value on balance sheets across global M&A transactions within the B2C sector from 2000 to 2021. Utilizing data from the Markables database, which includes 543 transactions, this study presents robust and quantile regression analyses to effectively address challenges arising from non-normally distributed data. The findings underscore a significant correlation between the strategic allocation of intangible assets, especially goodwill, and enterprise value, highlighting their essential role in reflecting future earning potential and growth prospects. Additionally, the study reveals specific factors, including transaction type (asset vs. share deals) and timing (transaction year), that influence these asset allocation decisions. These insights are critical for enhancing management decisions in valuation and strategic financial planning during M&A. By elucidating these dynamics, this paper significantly contributes to the literature on management accounting and corporate finance, offering a granular understanding of the valuation of intangible assets in business combinations. Acknowledgment This study emerged from a cooperative project between the University of Applied Sciences Kufstein (Austria) and the University of Economics in Bratislava (Slovakia) 2023-05-15-003 “Enhancing long-term business value towards environmentally and socially sustainable economy,” which was funded by the performance committee of the Austria-Slovakia Action initiative.

Penentuan Goodwill Pendekatan Dua Kolom dengan Memperhitungkan Unsur Pajak Penghasilan pada Laporan Keuangan Kombinasi Bisnis

The assets and liabilities of the acquiree and the acquirer are combined because of the business merger. The value of goodwill will be recognized if there is a discrepancy between the entire investment value and the value of assets and liabilities recognized, or equity eliminated. Financial Accounting Standards No. 22 of 2014 solely considers the fair value of the net assets purchased for determining goodwill. The aim of this study is to define the amount of goodwill is determined using the two-column approach in PSAK 22 2014 when considering the income tax aspect of a business combination because, in accordance with the tax law, a business combination is an object of income tax. This study is qualitative descriptive that relies on doing literature reviews pertaining to the computation of goodwill. From the discussion's findings, it can be inferred that the acquirer would recognize more tax debt when assets and liabilities are combined, increasing goodwill. The calculation of goodwill when accounting for income tax components may be expressed algebraically: goodwill = consideration provided + prior ownership plus non-controlling interests plus taxes due minus net assets. Theoretically, the result is that the amount of goodwill recognized and recorded will increase in proportion to the amount of tax debt that is recognized when assets and liabilities are combined. The amount of tax that must be realized by the acquirer is implied managerially to be proportionate to the net assets that the acquirer has acquired.

MERGER OF INDONESIAN ISLAMIC BANKS: BUSINESS COMPETITION LAW AND PROTECTION OF CUSTOMER’S RIGHTS

The merger of three Islamic banks into BSI has ignited discussions on monopolistic practices and unfair business competition. Some argue that BSI's merger breaches business competition law, specifically Law No. 5 of 1999, due to its control of over 50% of the market share of Islamic commercial banks. However, this argument lacks clarity on the determination of the relevant market, a crucial factor for assessing market dominance and potential monopolistic behavior. This article delves into the BSI merger process, analyzing market share within the defined market as outlined in Law No. 5 of 1999 and its associated regulations. Furthermore, it explores customer protection measures during the merger. The findings indicate that BSI's actions within the relevant market do not exhibit signs of monopolistic practices or unlawful business combinations prohibited by Law No. 5 of 1999. BSI has adhered to all regulatory requirements, ensuring customer protection throughout the merger process.

Goodwill measurement in consolidated financial statements

The largest business in terms of capitali­zation value, revenues and profits was formed as a result of a business combination. Consolidated financial statements are of undoubted value to users and stakeholders in assessing risks, prospects and analyzing the interaction of companies within the group. Special indicators of consolidated financial statements, such as goodwill, allow estimating the expected value of acquired companies in a business combination. However, the current methodology does not allow for the evaluation of all aspects of value that constitute goodwill. The aim of the article is to supplement the methods of goodwill valuation in business combinations for further substan­tiated disclosure in consolidated finan­cial statements, in accordance with the interests and needs of investors and managers. The research methodology is based on a systematic approach, critical analysis, synthesis, induction and deduc­tion, comparison, economic-mathematical methods of goodwill calculation, and genera­lization of principles of consolidated reporting. An analysis of key international standards allowed us to determine the peculiarities of applying the acquisition method for different types of business combinations. The share of ownership in an investee determines the nature of influence and the method of consolidation. Goodwill is the difference between the purchase price and the fair value of the net assets acquired in a business combination. When companies merge, goodwill reflects the intangible aspects of the business and the expected added value, which serves as the investment object. Therefore, methods for valuing goodwill during business combinations are identified to disclose in consolidated finan­cial statements in accordance with IFRS. Additionally, a group of complementary good­will valuation methods is systematized to determine and justify all aspects of forming the undisclosed added value of the investee compa­ny. The proposed methodology allows for considering the interests of various stakeholders in goodwill valuation. It is crucial to regard the goodwill disclosed in the financial statements as consent and willingness of the parent company to pay more, based on evidence and calculations obtained through a comprehensive goodwill valuation methodology. The proven hypothesis of the research suggests that for a justified valuation of goodwill during consolidation, it is necessary to supplement existing approaches and measure the value of brand, long-term stability, sustainable development, corporate so­ci­al responsibility, and utilize artificial intelli­gence. Goodwill reflects strategic value but may also be subject to impairment if its value is not sufficiently supported by expected profits.

The information content of SPAC securities

Special Purpose Acquisition Companies (SPACs) have taken the initial public offering (IPO) market by storm. SPACs were 2/3 of all IPOs in 2021 and have continued to be a significant portion of IPOs since. A unique feature of SPACs is that the SPAC shares trade for weeks/months after a target has been announced, but before the proposed deal is consummated, giving a window into the market's sentiment towards the deal terms. Although Shareholders' redemption option reduces the informativeness of SPAC shares, SPAC rights (& warrants) provide a window into the eventual pricing of SPAC shares post de-SPAC because they aren't redeemable. We explore the informativeness of the portfolio of SPAC securities and find new insight into the pricing of these transactions. Prices of rights and warrants are far more informative about the value of a proposed business combination than share prices, and warrant prices are predictive of future redemptions.

The Effect of Fair Value Accounting on Firm Public Debt – Evidence from Business Combinations Under Common Control

We analyze the choice allowed to parent firms under IFRS of how to account for a business combination under common control (BCUCC), and provide evidence on the motivation to select fair values and the economic implications of this choice. A BCUCC is a merger of two firms owned by the same parent. Under IFRS, parent firms can use the acquisition method (fair values) to record the BCUCC or use assets’ historical cost. We show that parents are likely to choose fair values when they desire to increase the transparency of their financial reports and when they likely need to raise capital. Using propensity-score matching, we find that firms that used fair values are more likely to issue new public debt following the transaction. We also find that the cost of issuing new debt for these firms is 55 basis points lower than that of comparable firms that did not do BCUCCs. Our results suggest that using fair values in BCUCCs can increase transparency and lower firms’ cost of debt.

Analysis of Transformation from Brokerage Business to Wealth Management Business of Huatai Securities

Seen from the Chinese securities companies 2023 half annual report , the first half of the performance is generally better, but the brokerage business is greatly affected by the market, the overall performance has declined , 54 of 57 data comparable securities companies growth rate is negative. This study will take the general decline of brokerage business performance of securities companies as the starting point, and Huatai Securities brokerage business has gradually transformed into wealth management business, so the analysis of Huatai Securities business as a research example is supported. Driven by social factors and internal factors, Huatai Securities should deepen its wealth management reform and analyze its weaknesses and opportunities from its own perspective. Meanwhile, this study gives suggestions for improvement, which can inspire the securities companies facing the same predicament to learn from the relevant experience and make prospects for development of Chinese securities companies. These results help China's brokerage economic business out of the development dilemma, to seek an organic combination of brokerage business and wealth management business, and to promote the prosperity of the securities industry.

The Effect of Takeover Protection in Quiet Life and Bonding Firms

Abstract Antitakeover measures are controversial because the evidence of their net effect on shareholders is mixed. We propose that, for many firms, the potential bonding benefits outweigh the agency costs of the quiet life, explaining the mixed results. We study business combination and poison pill laws as exogenous shocks to takeover vulnerability and use shareholder valuation of internal slack as an indicator of the net effect of takeover protection. Firms susceptible to quiet life agency problems exhibit a decrease in the market-assessed value of internal slack. Conversely, cash appreciates at companies where takeover protection bonds commitments with major counterparties.

Tracing Intellectual Origins in Accounting

ABSTRACT This paper seeks to track the intellectual evolution of four important streams of thought in the American accounting literature, tracing them back to their originating expressions. The four streams are decision usefulness in both management accounting and financial accounting, futurity in financial accounting, the literature on general price-level accounting, and consolidation goodwill in business combinations.

Enabling Professionals for Industry 5.0: The Self-Made Programme

Education in the Industry 5.0 context emphasizes a combination of technical and soft skills, multidisciplinary learning, and lifelong learning to empower individuals to leverage advanced technologies and drive innovation in the evolving industrial landscape. One of the critical challenges in education for professionals in Industry 5.0 is the rapid pace of technological advancements and the associated skill gap. Moreover, considering the interdisciplinary nature of Industry 5.0, professionals need to possess a combination of technical, business, and interpersonal skills to succeed in this context. Addressing these challenges requires a collaborative effort between educational institutions and industry stakeholders, involving the development of flexible and responsive educational programs. In this work, we present the Self-Made Programme, a novel blended training program designed to equip professionals with the necessary skills and knowledge to thrive in the dynamic landscape of Industry 5.0. The pedagogical component of this program consists of four different learning paths, offered by a consortium from five different European hubs. On the one hand, the program's focus lies in cultivating proficiency in Digitalization & Human-Centric Manufacturing, enabling professionals to navigate the convergence of physical and digital systems. On the other hand, the program equips professionals with essential skills in Data-driven Decision Making, enabling them to leverage vast amounts of data for strategic and operational insights. By combining theoretical foundations with practical applications, this training program empowers professionals to embrace the potential of Industry 5.0.

РАЗВИТИЕ КОНКУРЕНТНОЙ СРЕДЫ В СИСТЕМЕ ГОСУДАРСТВЕННОГО РЕГУЛИРОВАНИЯ ЭКОНОМИКИ РОССИИ – ИСТОРИЧЕСКИЕ И СОВРЕМЕННЫЕ ПРИМЕРЫ

Target. The purpose of the research is to analyze aspects of state regulation of the economy of small and medium-sized businesses in Russia for the period 1990–20220. during transformation in order to improve socio-economic relations with changes in the landscape of the Russian economy. Tasks. The objectives of the study are to consider various forms of small and medium-sized businesses in Russia, emerging and transforming in the 1990s–2000s, as well as state policy for regulating relevant socio-economic relations. Modern economic innovations in the form of the institution of self-employment as a new phenomenon of socio-economic life are considered. Various aspects of changing the competitive environment of small and medium-sized businesses in Russia are considered, taking into account self-employment, as well as measures of state regulation of the economy that are currently being discussed and implemented. Methodology. The historical aspect of the institutionalization and transformation of forms of entrepreneurship in Russia during the transition period of market reforms of the 1990s and early 2000s is considered. An analysis of the dynamics of development of small and medium-sized businesses in the Russian Federation for the period 2018–2022 is used. A combination of small and medium-sized businesses in the Russian Federation into a single classification was used to model their possible interaction. The current discussion positions of federal authorities are presented using content analysis of public speeches of their representatives. Results. The activities of the state for the period under review, 1990–2020, demonstrate the generally successful systematic work of state regulation in a wide range of socio-economic relationships for the formation of new forms of entrepreneurial activity. As a modern economic phenomenon, the institution of self-employment has become an essential part of modern social relations, playing an increasingly significant role in changing the structure and competitiveness of small and medium-sized businesses in Russia. Increased competition in the form of the emergence of the self-employed as a new category of economic business entities in Russia is a positive phenomenon for the economy as a whole. Conclusions. To ensure sustainable development and increase competitiveness, the state needs to develop effective measures to control and support entrepreneurs, including the self-employed, within the framework of their ecosystem interaction. Ways are proposed to level out the possible negative effects of self-employment for the development of competition within the scope of responsibility and competence of the Federal Antimonopoly Service.

A Study on the Improvement of Income Tax reporting For Business Combinations in Mongolia

A Study on the Improvement of Income Tax reporting For Business Combinations in Mongolia

Analisis Akuntansi Kombinasi Bisnis Dengan Konvergensi IFRS Pada Laporan Keuangan Perusahaan

In today's competitive business environment, there are many companies that look like a single entity when in fact they are made up of several separate companies. Some of these companies conduct business combinations consisting of mergers, acquisitions, and consolidations. In conducting these business combinations, there are regulations that govern, namely PSAK 22 as a result of IFRS convergence. This study aims to further analyze business combinations with IFRS convergence. The research method used is a quantitative engineering approach by focusing on literature review. The results of this study indicate a change in the purchase method to goodwill impairment testing, adjustments to non-controlling interests, and more detailed disclosures.