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AT&T WIRELESS-TELECORP PCS MERGER.   Term Paper ID:30696 Click to get this paper

Essay Subject: Examines the acquisition of TeleCorp by AT&T.... More...

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Paper Abstract: Examines the acquisition of TeleCorp by AT&T. Defines acquisitions and mergers. Motives involved including reduction of tax liability, net worth increase, meshing of distribution systems, complementing customer bases. Firms' expectations of greater value and competitive power. Approval of acquisitions by antitrust regulators. Issue of goodwill and intangible assets. Paper Introduction: AT&T WIRELESS - TELECORP PCS MERGER This paper examines the acquisition of TeleCorp PCS by AT&T Wireless announced in October 2001 (“AT&T Wireless, to Acquire TeleCorp PCS,” 2001). Acquisition is a generic term covering all forms of acquiring another firm, such as consolidation, holding company, merger, or purchase of assets with cash or stock. A merger is the combination of two or more firms. In most instances of merger, one corporation acquires the stock of another. The acquiring corporation then either retires the stock of the other corporation and dissolves the acquired corporation, or permits the acquired firm to continue operating in its own name as a wholly-owned subsidiary. Sensible motives for acquisitions and mergers are found when the positions of each company involved will be improved by the action. There are a number of th Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Neither does SFAS 141 permit the recognition of negative goodwill.Therefore, if a negative balance is caused by the reduction of carryingvalues of specified acquired assets to zero, the value must be recognizedby AT&T Wireless as an extraordinary gain. (2 1, October 8). Financial Accounting Standards Board. NewsRelease. 141. The Herfindahl-Hirschman Index is calculated by summing thesquares of the market shares of all market participants. AT&T Wireless - TeleCorp PCS Merger This paper examines the acquisition of TeleCorp PCS by AT&T Wirelessannounced in October 2 1 ("AT&T Wireless, to Acquire TeleCorp PCS," 2 1). (2 1b, June). When anacquiring firm is able to reduce its federal income tax liability throughacquisition or merger, it also increases its net worth. Goodwill andOther Intangible Assets. Solomon, D. Quarterly Journal of Business and Economics, 34, 39-54. SFAS 141 also requires theassignment of goodwill and intangible assets with infinite lives to aspecific reporting unit, which in this case will be AT&T Wireless(Financial Accounting Standards Board, 2 1a). Wall Street Journal, B6. SFAS 142 permits the amortization of intangible assets with finitelives. Norwalk, Connecticut: Financial Accounting Standards Board of theFinancial Accounting Foundation. SFAS does not limit amortization period for such intangible assetsto 4 years (Financial Accounting Standards Board, 2 1b). The higher theHerfindahl-Hirschman Index, the higher the potential for the exercise ofmarket power. To the extentthat the merger of AT&T Wireless and TeleCorp PCS produces any intangibleassets with finite lives, AT&T may amortize them. Statement of Financial Accounting Standards No.142. A Herfindahl-Hirschman Index below 1 is not considered aconcentrated market, while a Herfindahl-Hirschman Index between 1 and18 is considered to reflect some degree of concentration, and aHerfindahl-Hirschman Index greater than 18 is considered to reflectmonopoly power with a potential for significant market dominance (Amato,1995). (2 1a, June). Often, one firm will acquire another with either low or no netearnings, or, possibly, with tax credits. Further, theamortization of goodwill and intangible assets was possible under specifiedconditions. Concentration ratios are one of themost common tools used to examine a market's structure and, consequently,the ability of a group of organizations to exercise some control over amarket. All of these motives are present in the AT&T Wireless acquisitionof TeleCorp PCS (Deogun & Solomon, 2 1). These reasons areassociated with the principal ways in which net worth may be increasedthrough the process of acquisition or merger (Pahler & Mori, 2 ). (7th ed.). The pooling of interests method is no longer anoption for use in accounting for business combinations. Substantial synergy willresult from the acquisition to TeleCorp PCS by AT&T Wireless (Solomon,2 1). AT&T Wireless, to acquire TeleCorp PCS. Wall Street Journal, A3. Secondly,acquisition and merger may permit each of the firms involved to operatemore efficiently, and, thus, earn higher consolidated profits than theywould earn separately. In such instances, the acquiringfirm may be able to reduce its own federal income tax liability. Advanced accounting: Concepts &practice. Because the initiation of the acquisition of TeleCorp PCS by AT&TWireless occurred subsequent to 3 June 2 1 (the effective date of SFAS141 and SFAS 142), the new accounting standards will govern the accountingpractices for the merger. (1995, March). AT&T Wireless to buy restof TeleCorp. Any goodwill resulting from the merger of AT&T Wireless and TeleCorpPCS may not be amortized. (2 ). Deogun, N., & Solomon, D. Some examples of suchintangible assets are trademarks, Internet domain names, and trade secrets(Financial Accounting Standards Board, 2 1a). Motives, in this context, are associated with theprincipal business activities of the firms involved in a merger action.When the motives for a merger are only associated with short-term financialgains, it may not be assumed that the merger is intended to creatediversification benefits (Pahler & Mori, 2 ). In this instance, also, net worth would beincreased through the process of acquisition or merger. Statement of Financial Accounting Standards No. Redmond, Washington: AT&T Wireless. The requiredapproach for accounting for all business combinations is the purchasemethod (FASB, 2 1a). The implementation of Statement of Financial AccountingStandard (SFAS) 141 and SFAS 142, however, changed the account rules forbusiness combinations (FASB, 2 1a; FASB, 2 1b). The choice of structure measure in industrialeconomics. Pahler, A., & Mori, J. References Amato, L. AT&T Wireless confirms its agreement topurchase remainder of TeleCorp. Businesscombinations. Inmost instances of merger, one corporation acquires the stock of another.The acquiring corporation then either retires the stock of the othercorporation and dissolves the acquired corporation, or permits the acquiredfirm to continue operating in its own name as a wholly-owned subsidiary.Sensible motives for acquisitions and mergers are found when the positionsof each company involved will be improved by the action. Chicago: The Dryden Press. SFAS 141 includes an extensive list ofintangible assets that may qualify for separation. When the Pahler and Mori (2 ) text, Advanced Accounting, waspublished, accounting for business combinations could apply either thepurchase method or the pooling of interests method, depending upon theunique characteristics of the business combination. Financial Accounting Standards Board. There are anumber of these sensible motives, including (1) capital requirements by anacquired company, (2) the meshing of distribution systems, (3)complementing customer bases, and (4) similar reasons (Pahler & Mori,2 ). A merger is the combination of two or more firms. By combining the resources and expertise of two firms, a merger actionis taken with an expectation that a synergy will develop, which will, inturn, lead to a value and to competitive power for the combined firm whichare greater than the combined values and competitive power of the twoseparate firms. Norwalk,Connecticut: Financial Accounting Standards Board of the FinancialAccounting Foundation. Further, SFAS 141 delineates specific criteriafor the determination of which intangible assets must be accounted forseparately from goodwill. (2 1, October 8). Antitrust regulators must approve acquisitions involving firms in thesame or closely related industries. Acquisition is a generic term covering all forms of acquiring anotherfirm, such as consolidation, holding company, merger, or purchase of assetswith cash or stock. (2 1, October 9). If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.