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In M&A, SEC hints at relief over accounting rule differences

Tammy Whitehouse | February 27, 2018

Mergers and acquisitions could become a little more complicated for public companies this year as a result of changes in accounting standards and complexity around what needs to be reported.

A subtle change to the Financial Reporting Manual at the Securities and Exchange Commission in late December is causing some deal-making experts to pause over the effective dates of accounting rule for private entities that are, or want to be, acquisition targets for public companies, says Chris Clapp, managing director at consulting firm MorganFranklin.

“This is going to be a key component of due diligence for public companies going forward,” says Clapp. “Acquiring companies are going to need to assess target companies’ ability to comply. And if they can’t, it’s going to have to hold up a transaction until the target is prepared.”

Clapp is most concerned about revenue recognition, a massive new rule that public companies are required to begin observing in 2018. Soon after...

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