Rule Makes Execs Think Twice About Dealmaking

A Deloite survey says FASB's new merger rule will put the kibosh on transactions that until recently would have gone forward.

As always, acquiring companies value the target company's assets and liabilities, identifiable intangible assets, and some previously unrecognized contingencies at fair value at the time of the sale. But under the new measurement system, unobservable assets and liabilities, such as contingent liabilities that are measured using estimates, must be valued on what the company believes a hypothetical third party would pay for them, rather than rely on in-house models. "The most difficult part of implementing FAS 141(R) is coming to grips with fair-value principles that were never required before," Jay Hanson of McGladrey & Pullen told CFO.com in an earlier interview.

For example, Hanson opined on potential problems related to the way companies record merger-and-acquisition transactions in which the acquiring company buys less than 100 percent of a target company. Read More.