Accounting for Business Consolidations Essay

2540 WordsApr 22, 201311 Pages
In competing market it is very common for one business to merge with another one. In order to survive in this rivalry marketplace, Companies need to expand business to the most profitable capacity. No matter what kind of reasons for company seeking extension under the ownership, the main one is to track potential profit. Today’s business environment Financial Accounting Standards Board (FASB), one of regulators represented concepts related with business combinations. Below is my briefly understanding of accounting standards of business combination. What is the history of account for business combinations? How many businesses are consolidated with each other? Companies often learn that entry into new product areas or geographic regions is more easily accomplished by acquiring or combining with other companies than through internal expansion. For example, SBC Communications, a major telecommunications company and one of the “Baby Bells,” significantly increased its service area by combining with pacific Telesis and Ameritech, later acquiring AT&T ( and adopting its name), and subsequently combining with BellSouth. Moreover, Cingular Wireless, the largest provider of mobile wireless communications in the United States and now part of AT&T, was operated as a joint venture of AT&T (Baker, R. E., Christensen, T., & Cottrell, D. (2011)). AT&T was entering new business market and providing more kinds of service by merging. Owing to the poor economic status quo, the companies seek for surviving and combining during 2007 – 2008. The most common of internal expansion are: split – off occurs when the ownership of newly created or existing subsidiary is distributed to the parent’s stockholders without the stockholders surrendering any of their stock in the parent company. The split – off occurs when the subsidiary’s share are exchanged for share of the parent, thereby

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