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Describe how merger-related accounting inhibits a user’s ability to useaccounting reports to

make period to period comparisons.Is this true for boththe purchase method and the pooling
method?

Explain.
Only the pooling method of merger related accounting inhibits the user in usingaccounting
reports for period to period comparisons.The reason is that when usingthe pooling method of
accounting the financial statements are restated showing thatthe parent company owes the
subsidy before the sale is final.This makes period toperiod comparisons impossible because one
period the merger information is notthere the next it is so it is impossible to see what effect the
merger is actually havingon the financial statement of the company.With the purchase method
the informationis not put into the financial statements until the sale is final.Any differences
ininformation can also clearly be seen because of the way cost is figured using
purchaseaccounting.For example if a company buys a company for more than the fair
marketvalue the company must state why it has decided to do that.Say the accountants ofthe
parent company find that PP&E are understated by $20,000.They would recordthis showing that
this is why they paid $20,000 more than fair market value.

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Hanya metode penyatuan gabungan akuntansi gabungan yang menghambat pengguna dalam
menggunakan laporan arus kas untuk perbandingan periode ke periode. Alasannya adalah ketika
menggunakan metode penyatuan pooling, laporan keuangan disajikan kembali menunjukkan
bahwa perusahaan induk berutang sebelum penjualan dilakukan final. Hal ini membuat periode
toperiod perbandingan tidak mungkin karena satu periode informasi merger tidak ada berikutnya
sehingga tidak mungkin untuk melihat apa efek merger sebenarnya hadon laporan keuangan
perusahaan.Dengan metode pembelian informasi tidak dimasukkan ke dalam laporan keuangan
sampai penjualan adalah final. Perbedaan dalam informasi juga dapat dilihat dengan jelas karena
cara biaya diperkirakan dengan menggunakan jumlah pembelian. Misalnya jika perusahaan
membeli perusahaan lebih dari nilai pasar wajar, perusahaan harus menyatakan mengapa mereka
memutuskan untuk melakukan itu. akuntan dari perusahaan induk menemukan bahwa PP & E
kurang dari $ 20.000. Mereka akan mencatat hal ini menunjukkan bahwa t Itulah sebabnya
mereka membayar $ 20.000 lebih banyak dari nilai pasar yang adil.
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b.Explain why a high price to earnings ratio is crucial to Tyco’s acquisitions strategy
.As long as Tyco has a high price to earnings ratio it is able to acquire a companyfor less stocks
than it would be able to do if Tyco had a low price to earnings ratio.Basically since Tyco has a
high price to earnings ratio it shows that Tyco’s stock isworth more than the company that they
may be looking into buying.Since that is the case they will have to give up less stock to make the
purchase.I always think of it asusing U.S. dollars in Mexico.

d. Banyak keuntungan jangka pendek dalam akuisisi yang berasal dari pemotongan biaya. Apa yang berpotensi
membahayakan dari pemotongan biaya dalam jangka panjang ?

The largest problem with cutting cost to meet short term goals is that this cancause the company
to sell an inferior product.When this happens the loss ofcustomers can cause big problems in the
long term.This happens because fewerpeople buy the product and opt to buy a better product for
a little more money. Asword of mouth spreads the company can be faced with loss of profits.If
this isallowed to go on for many years the company may never get back its reputationwhich
could eventually cause the company to go out of business.There is a fine linebetween cutting
costs and selling an inferior product.

Another problem that cutting costs can create is a loss of experienced employees.This is because
most often cost are cut by taking away employee benefits.Mostemployees will look for better
opportunities when this happens.This in turn causesthe company to hire and train new employees
which can cost more money than justkeeping the experienced employees with their benefits.This
also could contribute to making an inferior product because new employees simply do not have
the sameknowledge of production as a seasoned employee would have

e.Tyco’s controversy is arguable a quality of earnings concern, where Tycostrategically used the
discretion in GAAP. Why is the market’s reaction to this alleged behavior so severe?
There were two basic things that Tyco did that used the discretion in GAAP.Firstthey did was
during periods of high earnings they set aside profits to inflate theirearnings in the short term.In
order to accomplish this they used additional expensesto set aside extra earnings for the
future.The biggest problem with this is whenfiguring out additional expenses there is a lot of
estimates being used.Theseexpenses than were reduced creating inflated revenues.The next thing
that they didwas mess with the timing of accounting accruals.What this means is they may have

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