Private operating companies seeking a ‘fast track’ stock exchange listing sometimes arrange to be acquired by a smaller listed company (sometimes described as a ‘shell’ company). This usually involves the listed company issuing its shares to the private company shareholders in exchange for their shares. How should these transactions be accounted for?
This document looks at:
- is the transaction a business combination?;
- accounting when the transaction is not a business combination;
- accounting when the transaction is a business combination;
- identifying the accounting acquirer;
- is the acquisition a business combination?;
- developing an accounting policy when the listed shell is not a business;
- treatment of excess of acquisition cost over net assets acquired;
- disclosures; and
- separate financial statements.