Category Archives: Mergers and Acquisitions

Cooperative Trends of 2010 – What We Have Seen

Build, build, build! Many clients spent substantial dollars for fixed asset additions, primarily grain and liquid fertilizer storage facilities. It appears these additions have been good investments.

Shark Repellents and Poison Pills

The topic of how much retained earnings is appropriate keeps surfacing as well. One of the concerns that comes up is how the proceeds of a sale of the company would be distributed if the company were to sell. And, with the retained earnings being significant relative to the equity in the names of the members, the concern turns to how vulnerable the cooperative is to an offer that could be perceived as attractive to the members but would end up being a discounted sale of the coop– one heck of a bargain for a buyer.

Section 199 Update – Amended Returns

So far, there have been several private letter rulings dealing with section 199. These rulings have been issued on pooling cooperatives, although a thorough review of the facts indicates that all of the cooperatives involved have been conducting their business like non-pooling marketing cooperatives and are pooling cooperatives in name only.

Mergers – No More Pooling

As most of you know, the pooling of interests method simply combined the accounts of each merging company at book value, with no adjustments to reflect market value differences. In addition, retained savings of both companies were also combined.

FAS 141R: The End of Pooling-of-Interests in Mergers

Effective January 1, 2009 mergers of credit unions will be accounted under the “Acquisition Method” of accounting. Each merger will require an acquirer to be identified. Further, the acquirer is required to recognize the assets acquired and the liabilities assumed to be measured at their fair values as of the date the acquirer achieves control.

Update to FASB’s SAS 141

Simply put, in accounting for mergers in the past, we have combined the balance sheets of the entities involved. After this Statement becomes effective, that will no longer be the practice.