Accounting for M&A Transactions - (F) - Q3

Participation Prerequisites

Financial Statements, International Accounting (or equivalent), BSc

Course Content

This course introduces an area of financial accounting that is highly relevant in practice: the accounting for business combinations (M&A transactions). M&A transactions are investments that often involve large sums of money and can profoundly change the size and structure of companies, with potentially large effects on firm value.

Survey studies by consulting firms and academic research in industrial economics and corporate finance find that a high percentage of M&A transactions fail to meet their operational and financial goals. Therefore, transparent and insightful reporting on the consequences of M&A transactions is very important to investors and other addressees of financial statement information.

Understanding the accounting for M&A transactions is also important to managers of companies engaging in such transactions, to investment bankers, analysts, and other experts advising companies on these issues, as well as to managers of banks that lend money to companies involved in such transactions.

Against this background, the course objectives are as follows:

• Provide an overview of M&A transactions and processes.
• Introduce the accounting rules and reporting requirements for M&A transactions (business combinations).
• Explain the incorporation of newly acquired subsidiaries into companies’ consolidated financial statements (“purchase price allocation”), and the accounting concept of “goodwill” and its treatment in subsequent reporting periods (“goodwill impairment test”).
• Outline the financial reporting of investments in joint ventures and associates.
• Discuss how M&A transactions affect financial statements and key financial ratios.

This course focuses on financial statements prepared under International Financial Reporting Standards (IFRS), which publicly traded companies domiciled in the EU are required to apply. However, the issues discussed also pertain to other national accounting systems, for example, to German accounting (HGB) or to US Generally Accepted Accounting Principles (US GAAP).

Intended Learning Outcomes and Competencies

Instruction Type

On Campus/ Classroom instruction/ Discussion/ Group work

Form of Examination

Literature

There will be specific literature recommendations provided at the beginning of the course.

General IFRS-related literature recommendation:

You may want to bring your copies of IFRS to class; you may want to consult them during discussions and for exercises.

However, there are various ways of obtaining an up-to-date version of IFRS:

• This EU website provides you free of charge with an English-language consolidated version of the currently applicable standards enacted by the EU.
• The following page presents the EU enacted standards in all official EU languages (select current version): https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02008R1126-20210401
• The IASB website offers free access to the current English language versions of the standards and the official interpretations (registration required).
• Book versions of IFRS are available from various publishers. For example, Wiley offers a relatively low-cost bilingual version of the IFRS in English and German.

General textbook literature recommendations in the course:

General reading recommendations will be based mainly on the following two textbooks:

• Alexander, Jorissen, Hoogendoorn, van Mourik, Kirwan, Inwinkl, Michelon (2023), International Financial Reporting & Analysis, 9th edition, Cengage Learning.
• Picker, Loftus, van der Tas, Kolitz, Livne, Loftus, Koning, Service (2025), Applying IFRS Standards, 5th edition, Wiley.

For other parts of the course and further insight, you may refer to the commentaries by leading international accounting and auditing firms, or recent literature and research in the field.