A complete renaissance of the policies and practices of corporate finance has taken place in
the last three decades across the world. With the gradual progression in market
efficiencies towards perfection as well as the escalation of cross border trade and
commerce with consequential diminution of trade barriers, the intensity of competition has also been
heavily upstaged. Corporates are being compelled to adopt innovative strategies in an effort to
sustain margins and thereby, manage subsistence. As fallout, the frequency and quality of
corporate mergers/acquisitions/takeovers have grown manifold and `business combinations' have
become an essential ingredient of the corporate strategy rulebook. As a consequence of the rapid
evolution of such complex corporate strategies and practices, the need for rational and
streamlined accounting standards/norms, in the context of `business combinations accounting', to
facilitate transparent and symmetrical disposition of all `relevant' facts without any element of
`window dressing' is immediate and its importance can hardly be overstated.
Commensurate with this exponential and rapid growth in the instances of
corporate amalgamations, there needs to be developed a comprehensive framework insofar as the
accounting treatment and financial reporting of related issues are concerned. The extant
regulatory pronouncements are inconsistent and incomplete, not only across the different types of
business combinations but also across different countries and, in some cases, states as well.
As one of the most sensitized professional outfit, the Financial Accounting Standards
Board (FASB) of the US enacted FAS 141 and 142 titled `Business Combinations' and `Accounting
for Goodwill and other Intangible Assets', respectively
in June 2001, the provisions of which become applicable
to all US-based entities for fiscal years beginning
after December 15, 2001. |
