Merger and Acquisition (M&A) activity is likely to grow as economic conditions improve. Companies have told the Financial Reporting Council (FRC) that M&A accounting is costly and difficult, yet investors say that the resulting information is not useful.
This FRC study of the quality of accounting and reporting on acquisitions suggests a possible reason for this is that the International Financial Reporting Standard (IFRS) on business combinations has been poorly applied by companies due to unfamiliarity with its requirements and the complexity of valuing intangible assets such as brands and customer relationships.
The study found that companies had provided insufficient or inconsistent information about material acquisitions in their audited accounts when compared to the rationale for these acquisitions and supporting explanations given in their business reviews.
See full Press Release.
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