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A Comment on Establishing the Fair Value of Consideration Given in an Acquisition
Author(s) -
TROWELL JOHN
Publication year - 2007
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/j.1835-2561.2007.tb00342.x
Subject(s) - value (mathematics) , accounting , business , mergers and acquisitions , actuarial science , law and economics , economics , positive economics , computer science , finance , machine learning
The distinction between offer date and acquisition date is important when determining the fair value of shares offered as consideration in an acquisition or takeover. Standards on business combinations have required this to be determined at acquisition date, certainly since 2001, even though earlier opinions such as APB Opinion 16 had allowed the use of offer date. Despite this, Lonergan (2004) continued to favour the use of offer date, using the Wesfarmers takeover of Howard Smith in 2001 as support, and claiming that acquisitions are essentially locked‐in from the offer date. But this is generally not the case. This paper shows that acquisition date is correct when conditions change during a takeover.