Andreas -
Thank you for your informative if somewhat testy post. Although I can read a balance sheet I don't claim to be an accountant, and it is always refreshing to get clarification on my thinking.
As far as I can tell from your post, you agree completely with my position, but let me just list a few of the key points to be sure we're on the same page. I will list my description in bold and yours in italic.
A reduction of the goodwill will not (i) impact cpq's cash outlay one cent at the time of acquisition
the 'purchase price' of DEC was unaffected by the CPQ stock price
We agree that the purchase price was independent of the stock price at time of transaction
will have a negative cash impact upon cpq due to a reduced write-off of goodwill
the valuation of the 'goodwill' associated with the purchase is substantially affected, and may have been reduced as much as 70% because of where the stock happened to land
The lower the CPQ stock price at the time of the transaction, the lower the value of goodwill associated with the transaction.
You didn't discuss the issue of options conversion but I think we would both agree that it has no impact on either valuation or the income statement, so it is not properly a part of the merger accounting, although it could have affected the thinking of the parties involved.
the greater the goodwill the higher the amortization write-off and the greater the basis in the event of a later sale, which is of a benefit to the purchasing entity.
I did not address the impact of a change in valuation of goodwill in my post but I agree with your assessment.
If you want a detailed explanation of the accounting entries reflecting the dec purchase let me know and I will be more than happy to provide them
Thank you for the offer but I am already in possession of a very detailed analysis of the merger accounting on this transaction.
It is that simple
I think that only an accountant could think that the merger analysis is in any respect simple. The document I refer to above runs to more than 600 pages not including the appendices, and that does not include factors like the conversion of options which affect more than 100,000 current and former DEC employees but are not part of the merger accounting.
Thanks again for your informative posts and I hope you will continue to provide insight to those on this thread who have difficulty in understanding the merger accounting issues which could affect stock price, for example the impact of the carry-forward on EVA over the next 18 months. |
