Fair value model fuels controversy

The first proposals for a converged standard from the International
Accounting Standards Board and its US counterpart FASB will be accounting for
mergers and acquisitions to a ‘fair value model’.

The proposal will have major implications for merger accounting, not least
the idea that a buyer will recognise the full goodwill of an acquired company,
including the goodwill of minority shareholders.

Experts believe that the standard may ‘fuel’ controversy because of the
difficulty in calculating fair value amounts. There were also calls for further
work on accounting for M&A.

Mark Vaessen, head of KPMG’s financial reporting group, said: ‘We see a real
need for a next phase on M&A related topics. There are quite significant
practical issues around group reorganisations and joint ventures that we would
like addressed.’

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