Deal-Related Accounting Implications

By: Michael Mathieson

The role of the CFO and the corporate controller’s group continues to grow and evolve into a critical position with the deal team. There’s more to M&A than simply doing the deal – the implications of the transaction must be accounted for and survive ongoing scrutiny, both today and in the future, from auditors and other external parties.

[Transcription]

I have always thought that the most important attribute is common sense. Sometimes, you have to just take a step back and say, “What’s this telling me? And how should I react to it?”

I remember, when I first started in the business of accounting, most of the time the accounting department didn’t even know a transaction was happening. The company would sign a deal and say, “Oh, by the way, we’ve got this acquisition that you need to account for.” That was a time where you didn’t have the dramatic implications of two areas, which has ratcheted up considerably over the last 10, 15, 20 years. One is the control environment, and the second is the implications of the forward-looking information and the short-term aspects of what is in the market.

When you are using an independent valuation firm, they are being incented on providing services. They’re not being incented on what the answer is, so they come at it with an objective viewpoint, trying to understand the transaction and trying to understand what is the value of this piece of it or the overall aspect of it. Equally important is the independence associated with valuation as well as how a company has to deal with the regulatory environment and their auditors. To anticipate where you might be six months or even a year from now, you need to understand what may be coming, what may be the implications associated with it, and make sure that everybody is making the right decision with all the knowledge that’s necessary.