Strategic Planning - Mergers and Acquisitions
Reliability of financial reporting
A. Authorized expenditures are recorded in purchase accounting for the proper period.
- Does the accounting department receive copies of documents authorizing the transaction before entering purchase accounting data into the system?
- Does senior management review and approve purchase accounting entries and confirm that supporting documentation is sufficient?
- Does personnel preparing purchase accounting entries receive from the executive managing the deal a list of deal expenditures and record all expenditures properly, either as part of purchase price or period expense?
- Does management at an appropriate level approve late invoices (those received after the transaction closes) for inclusion in purchase accounting?
B. Tangible and intangible assets receive proper valuation.
- Are persons with appropriate valuation skills and credentials employed to identify and valuate intangible and net assets? For complex and significant transactions, is an independent third party employed?
- Are the significant assumption and the results of the valuations reviewed and approved by senior management?
C. Purchase accounting is applied properly.
- Does the accounting department obtain assistance from legal counsel to confirm that the transaction terms properly apply purchase accounting, and does the department obtain senior management approval?
- Is a critical review of the items capitalized in the purchase price performed to ensure conformity with GAAP?
D. Financial results of the universities are combined accurately.
- Do persons with appropriate expertise in the financial statements of the target perform a due diligence review?
- For immaterial acquisition transactions without the services of external auditors, does the acquiring university perform a complete review of financial statements to identify any inaccuracies or omissions?
- Are all adjustments approved by the appropriate level of management and is the supporting documentation adequate?
- Do due diligence and closing balance sheet reviews identify differences between the target and the acquiring university's accounting policies?
- Does senior management at the acquiring university review differences in accounting
policies and approves or changes differing policies?