FRA vs Corp Finance

CFA Level II
#1

hi everyone,

i’m a little confused here:

Corp Finan:

Subsidiary Merger: The target company becomes a subsidiary of the acquirer

Acquisition: One company buys only part of another company

FRA:

Merger

Co A + Co B = Co A. Net assets transferred from B to A.

Acquisition

Co A + Co B = (Co A + Co B). Co A = parent, Co B = sub

i find acquistion on FRA is the same as a merger on Corp finan… am i missing something here?

#2

There are 3 types and you may remember in this manner:

  1. Statutory Merger

A+B = A

  1. Subsidiary merger

A+B = A’

  1. Statutory consolidation

A+B = C

#3

Surprise, surprise!

#4

That’s same terminology but confuses you just because accounants do not speak same plain language as others so have their unique terms. Don’t worry, until L3 you will become familiar.

Upon acquisition each type of M&A is considered in accountancy.

#5

hehe Thanks ya’ll, what confuces me is what is Acquisition?

is it :

  1. Co A + Co B = (Co A + Co B). Co A = parent, Co B = sub (as mentioned on FRA notes) ?

or

  1. is it One company buys ONLY PART of another company (as stated on Corp Fin) ?
#6
  1. case A + B = A’ B continues to exist as sub of A.

There are 2 FS report sets One consolidated which contains business segment in B as well as A finanical data merged.

Another set of FS, separetly for A and B which contain their separated business activities. In the last one, you can find also transactions between A and B since those are offset (thus not visible) in consolidated report.

  1. case A + B = C

C is brand new entity and A and B no longer exist. FS is straightforward for new entity as prior acquisition for each of entities.

  1. case A + B = A

A completely assimilated B, thus B no longer exists. FS as in point 2.

That is how the things are in FRA.