Section 74 Accounting Changes (New Section)

• Library: Business Transitions 2009 Supp

Even though most would argue that the current market environment has made it more difficult, some would say impossible, to accurately measure the true “value” of assets and liabilities on a fair market basis, the Financial Accounting Standards Board (FASB) now requires participants in a merger or acquisition to do so under its Statement of Financial Accounting Standards (FAS) 157, Fair Value Measurements, and FAS 141 (revised 2007), Business Combinations. These standards add an additional layer of complexity to the accounting aspect of the acquisition process, especially with respect to valuing contingent consideration under FAS 141 and accounting for, and reporting of, such items as transaction costs, restructured liabilities, and other financial statement items. Counsel should ensure that clients understand and address these concerns.

Some critics contend that the “mark-to-market” accounting standard, which requires companies to value securities that they hold...