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    Module 3 - Special Accounting Topics: 4. Reverse Acquisitions

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    Ed Mark Angel C. Belleza
    This document discusses reverse acquisitions, where the entity that issues shares (the legal acquirer) is considered the acquiree for accounting purposes, while the entity whose shares are acquired (the legal acquiree) is the acquirer. For a reverse acquisition to be accounted for, the accounting acquiree must meet the definition of a business. The consideration transferred is based on the number of shares the accounting acquirer would need to give the accounting acquiree owners to achieve the same post-acquisition ownership percentage.

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    Module 3 - Special Accounting Topics: 4. Reverse Acquisitions

    Uploaded by

    Ed Mark Angel C. Belleza
    51 views1 page
    This document discusses reverse acquisitions, where the entity that issues shares (the legal acquirer) is considered the acquiree for accounting purposes, while the entity whose shares are acquired (the legal acquiree) is the acquirer. For a reverse acquisition to be accounted for, the accounting acquiree must meet the definition of a business. The consideration transferred is based on the number of shares the accounting acquirer would need to give the accounting acquiree owners to achieve the same post-acquisition ownership percentage.

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    This document discusses reverse acquisitions, where the entity that issues shares (the legal acquirer) is considered the acquiree for accounting purposes, while the entity whose shares are acquired (the legal acquiree) is the acquirer. For a reverse acquisition to be accounted for, the accounting acquiree must meet the definition of a business. The consideration transferred is based on the number of shares the accounting acquirer would need to give the accounting acquiree owners to achieve the same post-acquisition ownership percentage.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    51 views1 page

    Module 3 - Special Accounting Topics: 4. Reverse Acquisitions

    Uploaded by

    Ed Mark Angel C. Belleza
    This document discusses reverse acquisitions, where the entity that issues shares (the legal acquirer) is considered the acquiree for accounting purposes, while the entity whose shares are acquired (the legal acquiree) is the acquirer. For a reverse acquisition to be accounted for, the accounting acquiree must meet the definition of a business. The consideration transferred is based on the number of shares the accounting acquirer would need to give the accounting acquiree owners to achieve the same post-acquisition ownership percentage.

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    10/19/2020 Module 3 - SPECIAL ACCOUNTING TOPICS

    Module 3 - SPECIAL ACCOUNTING TOPICS

    4. Reverse Acquisitions

    In a reverse acquisition, the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes. The
    entity whose equity interests are acquired (the legal acquiree) must be the acquirer for accounting purposes.
    For example, reverse acquisitions sometimes occur when a private operating entity wants to become a public entity but does not want to
    register its equity shares. To accomplish that, the private entity will arrange for a public entity to acquire its equity interests in exchange for
    the equity interests of the public entity. In this example, the public entity is the legal acquirer because it issued its equity interests, and the
    private entity is the legal acquiree because its equity interests were acquired. However, in applying the acquisition-method:

    a. the public entity is the acquiree for accounting purposes (the accounting acquiree); and

    b. the private entity is the acquirer for accounting purposes (the accounting acquirer).

    The accounting acquiree must meet the definition of a business for the transaction to be accounted for as a reverse acquisition, and all of the
    recognition and measurement principles in this PFRS, including the requirement to recognize goodwill, apply.

    Measuring the consideration transferred

    In a reverse acquisition, the accounting acquirer usually issues no consideration for the acquiree. Instead, the accounting acquiree usually
    issues its equity shares to the owners of the accounting acquirer.
    The acquisition-date fair value of the consideration transferred by the accounting acquirer for its interest in the accounting acquiree is based
    on the number of equity interests the legal subsidiary (accounting acquirer) would have had to issue to give the owners of the legal parent
    (accounting acquiree) the same percentage of equity interest in the combined entity that results from the reverse acquisition.

    Click the link below for the illustration

    Illustration (Reverse Acquisition)

    https://college.neu.edu.ph/mod/book/tool/print/index.php?id=5121&chapterid=32624 1/1

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