Study on Accounting Regulation for Business Combinations
Running a business involves continuous growth. Such growth can be organic, stemming from resources created internally in the enterprise. However, in many cases an external development strategy is adopted, based on acquisition of other entities. Suc...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/06/26440814/study-accounting-regulation-business-combinations http://hdl.handle.net/10986/24803 |
| Summary: | Running a business involves continuous
growth. Such growth can be organic, stemming from resources
created internally in the enterprise. However, in many cases
an external development strategy is adopted, based on
acquisition of other entities. Such an acquisition may
involve creation of a capital group, within which each of
the companies maintains its separate legal personality.
However, if a capital group is not the optimal form for the
given business activity, acquisition of another entity may
take form of a business combination. In such case, assets
and liabilities of the acquire are directly incorporated
into the books of the acquirer. The overriding principle of
accounting regulation is primacy of economic substance over
legal format. Pursuant to this principle, economic
transactions must be recorded in the accounting records in
accordance with their economic nature1. In order to
determine properly the economic nature of a business
combination, an analysis must be performed of economic
impacts of such a combination. Economic consequences for
merging entities are described in the provisions of
commercial law. |
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