What is a controlling financial interest? How did the FASB define this in FIN 46(R)? What are typical difficulties in ascertaining whether control exists where perhaps no voting interest is actually maintained? Please choose a recent business combination and address what you feel their motives were for the combination. Do you see any problems with their decision to combine?

What is a controlling financial interest? How did the FASB define this in FIN 46(R)? What are typical difficulties in ascertaining whether control exists where perhaps no voting interest is actually maintained? Please choose a recent business combination and address what you feel their motives were for the combination. Do you see any problems with their decision to combine?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter10: Corporate Governance

Section: Chapter Questions

Problem 3MC

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Which of the following statements is true when assessing whether potential voting rights contribute to control? Even when potential voting rights are not exercisable or convertible until a future date or until the occurrence of a future event, they are still considered in making that assessment. The proportions of profit or loss and changes in equity allocated to the parent and non-controlling interests are determined on the basis of present ownership, and should reflect any exercise or conversion of potential voting rights. Where potential voting rights are currently exercisable or convertible, they are considered when assessing whether an entity has the power to govern another entity's financial and operating policies. In assessing whether potential voting rights contribute to control, all of the facts and circumstances that affect those rights should be considered including the intention of management and the financial ability to exercise or convert such rights.
Which one of the following is the least likely reason a company may acquire an ownership interest in another company? Select one: a.To benefit form an overvaluing of assets in the investee company b. To oust an inefficient management team c. To take advantage of operating and/or cost synergies d. To exercise an active role in the business' activities
Which of the following motives for M&A transactions (from the perspective of the shareholders of the acquiring firm) can be assessed as economically valid or dubious?
Find a recent merger transaction that failed due to regulatory concerns over market share concentration and reduction of consumer alternatives. Do you support the regulatory concerns? Explain briefly the transaction and your reasoning.
What are the different financial risks in business acquisition and combination?
How important is intercompany activity on decisions to form business combinations? We see intercompany transfers quite often between companies involved in a business combination. Why do you feel that this happens so frequently? Is this ever a concern to the investors, controlling and noncontrolling?
Which of the following is closest to IFRS 3 Business Combinations definition of control? A company is deemed to have control over another only when it owns a majority of the voting shares of another company. B. A company is deemed to have control when it can elect a majority of the Board members of another company. C. Control is the ability to direct the activities of a company that most significantly affect the investor's returns. D. Control exists only when a company has the continuing power to determine the operating and financing policies of another company and attempts to exercise such powers.
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Is it possible for a person to form a joint venture with a business? What's your theory about that?
1. As an executive, there is significant leeway to control the level and quality of public information (within legal reason). What general strategies on information disclosure from a potential acquirer's point of view might result in higher realization of value for their shareholders? To the extent possible, are there any deals that fit into this particular strategy?
Agency problems are said to be inherent in the corporate form of an organization. Why do you think this is the case?Do you think agency problems arise in a sole proprietorship or a partnership?What steps would you take to reduce agency problems in a so-called typical corporation?
What are variable interests in an entity and how might they provide financial control over an entity?