How is that done? Lets say after the acquiring company consolidates its income statement after acquisition, it shows sales of $500 million, whereas last year sales were $200 million, how is last year’s income statement restated?
last years income from subsidiary + last years 200Million on parent… and so on for everything else (on either the income statement or balance sheet). from the time the two companies got pooled together (they are joined at the hip, so to speak). so for all previous periods the pooling consolidated financial statement preparation process would be repeated.
and if there are 50 years of financial statements, what do they do? Would anyone like to be an M&A accountant?
hence the move towards purchase vs pooling? i certainly wouldn’t want to be any sort of accountant.
But now we are really distorting historical comparison after getting rid of the pooling method, aren’t we? No other method restates financial statements, and I’m afraid as analysts, we are expected to do that ourselves?
i dunno- doesn’t it feel like distorting them even more to smoosh (smush? that’s a funny looking word written out) 2 companies together historically as if they were 1 when they weren’t up to the point in time when they consolidated? tell me to start reading SS17 now and stop procrastinating. i can’t avoid swaps forever. it’s time.
It depends how you look at it. If last year’s NI was $100 and this year (after consolidation) it’s $300 milion, has the company’s earnings really improved? But with restatement, you would see may be last year it was $270 and now $300, a much more realistic growth. That’s what they do with stock splits and large dividends, they restate prior numbers. I did half of the swaps study session, and it wasn’t too painful.