Financial Bilingualism as a Success Factor for Effective Business Combination Project: The Case of US Investors
Financial Bilingualism as a Success Factor for Effective Business Combination Project: The Case of US Investors

Author(s): Alexandra Bagiová, Jitka Meluchová, Martina Mateášová
Subject(s): Business Economy / Management
Published by: Masarykova univerzita nakladatelství
Keywords: IFRS; US GAAP; business combinations; investment decision; goodwill; merger and acquisition;
Summary/Abstract: Many of the world’s capital markets require some version of IFRS for financial statements of listed entities. With IFRS covering 87% of the world´s biggest jurisdictions, it is a key success factor for a US capital market participant to be financially bilingual, as they continue to look for global investment opportunities. In this paper we identify the key issues evolving in the decision-making process when engaging in business combinations with IFRS preparers. Using detailed textual analysis of the current IFRS and US GAAP provisions, the paper identifies the set of factors to consider in any merger or acquisition made between US company and a company reporting under IFRS. We concluded that despite of the global harmonization of accounting reporting in the area of business combinations there are still implication differences causing significant changes in the value of shares, equity or goodwill that might imperil the success of investment decisions of US investors. Therefore, the aim of the submitted paper is to provide guidelines on reduction risks resulting from a lack of knowledge of the differences between the IFRS and the US GAAP and to create information basis for both, investors primarily using US GAAP but also those preferring the IFRS, to become financially bilingual.

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