Consolidating balance sheet after acquisition

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Assets, liabilities and owners’ equity are the three main parts of the balance sheet.These parts form the accounting equation that states that the assets of a business are equal to the sum of its liabilities and owners’ equity.

He has been working as a senior accountant for leading multinational firms in Europe and Asia since 2007.

Cole-Ingait holds a Bachelor of Science Degree in accounting and finance and Master of Business Administration degree from the University of Birmingham.

In a merger, the combined entity usually retains the identity of the dominant or larger entity in the union.

As for an acquisition, it may be negotiated or forced depending on the circumstances leading to the takeover of a firm.

Purchasing a company at its net worth reduces the likelihood of assuming liabilities that might be too costly to compensate.

Buying the entire shareholding of a target company could be very costly, especially with regard to issues such as litigation, labor disputes and awards for damages that might arise in future.Other than organic growth, a business can enter mergers or acquire other firms to accelerate its market expansion.However, mergers and acquisitions are not as simple as they may sound.Designate the top part of the paper for the consolidated income statement, the middle part for a consolidated statement of retained earnings and the bottom section for the consolidated balance sheet. Use the most recent income sheet information the companies have available, provided by either their accounting departments or the annual investor's report if they are public companies.Create an income statement for the two companies as if they were one.Whereas a negotiated takeover is underscored by friendliness and cooperation, a forced one is usually marked by hostilities and resistance.Nonetheless, the balance sheet is always a major source of contentious issues in business combinations regardless of the form they take.This anomaly can be corrected by repurchasing some of the issued shares so as to stabilize stock prices and increase per-share earnings.Paul Cole-Ingait is a professional accountant and financial advisor.The acquiring company can restructure the balance sheet of the target entity soon after a merger or acquisition to eliminate some of its burdensome obligations.For example, a target entity that has issued too many shares brings about the burdens of diluted dividends and unstable stock prices.


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