Introduction
On October 2009, Pfizer completed its acquisition process with Wyeth Company (ltd). The company of Pfizer agreed to acquire one of its main rivals Wyeth, on the agreement of $68 billion. Pfizer was at the time, the largest drug producer in the whole world. The company received regulatory approval from concerned government authorities as well as from all shareholders of Wyeth. According to acquisition transaction terms, all shares of stock outstanding belonging to Wyeth were converted to Pfizer’s common stock. A total of $33 was converted in cash without any form of interest.
Challenges faced in preparing financial statements
In preparing the financial statements for consolidation of Pfizer and Wyeth company subsidiaries, the companies faced a challenge on estimations to use that could affect any reported accounts and other disclosures such as acquisition connections. The company also considered the use of estimates when preparing consolidated statements in accounting for any revenue deductions. These revenue deductions included sales returns, chargebacks, and rebates. The use of estimates was also used to determine sales costs and allocating them in depreciation form (Bhagwati, 2004).
The financial estimates can easily prove to be incomplete or some reports may be inaccurate. This, therefore, resulted to future events not been resolute with precision at all. In multinational acquisitions such as that of Pfizer and Wyeth, negative market conditions may occur therefore increasing the uncertainty of all the assumptions and financial estimates. These market conditions are factors such as foreign currency fluctuations, economic downtowns, illiquid credit markets and equity markets that are volatile.
The companies adjusted to their preferred estimates after facts show that there is a need for reform and this can be helpful in avoiding most of the challenges Pfizer was faced by a challenge in appointing the company of Computershare trust to become its agent on merger exchanges. These challenges resulted after shareholders of Wyeth raised questions on the contacts that were given regarding payments on the company’s stocks. Another challenge that will face Pfizer is on how to pay back the credit loan of $22.5 billion to five that had lent it some money. Pfizer acquired Wyeth’s outstanding equity in transaction of cash and stock. The acquisition of Wyeth was accounted using method of acquisition accounting and it required various assets to be acquired and liabilities that were assumed were recorded using the fair value of acquisition. The companies adjusted to their preferred estimates after facts show that there is a need for reform and this can be helpful in avoiding most of the challenges (Bhagwati, 2004).
Special issues related to multinational acquisition
Pfizer and Wyeth started operating jointly as NYSE and WYE on October 2009. Wyeth was not put under liquidation process since its case was to merge with Pfizer but most all its creditors were paid all their liabilities. Its workers were compensated and the majority of them were given jobs at the new Pfizer Inc. reorganization of Pfizer Company limited was through the use of income approach which resulted to identifying the fair value of intangible assets. In insolvency all incurred liabilities were exempted and principles were measured on fair value that could account for all assets of the business combinations. This was determined by forecasting the net cash flows of all the company assets and presenting the value on a discount rate that is able to reflect on any available risk factors that may be connected to cash flow. The determination of any available discounts as well as premiums on ownership rights as well as business ownership forms between the transactions of guideline companies.
Goodwill
The company also resulted to the implied fair value of goodwill that was determined by both companies estimating their fair value. The amount of goodwill created was adequate for the business combination because cash flow was discounted and estimated on terminal value and discounted to the present value. To effectively estimate the value of the goodwill, the market approach was used and this helped in comparing the business segment with other companies that had their securities traded in U.S public markets. In the cases of diversified businesses, Pfizer used an income approach whereby the cash flow discounted was estimated on terminal value and discounted to the present value. This resulted to some of the estimates of the goodwill estimation process be based on comparison to guideline firms. Goodwill is determined by preparation of estimated consolidated balance sheets and these results to evaluation and recovery of all assets. In preparing the financial statements, another challenge is on determining the estimations of the book value and reported liabilities. These liabilities may include taxes payable and contingency impacts. The company came up with the resolution of accounting for all the implied book value and other valuable assets that had been accounted for (Bhagwati, 2004).
A financial statement for consolidation of subsidiaries on the date of acquisition between Pfizer Inc and Wyeth
| 2009
$ |
2008
$ |
2007
$ |
||||
| Revenues | 50,009 | 48,296 | 48418 | |||
| Cost of sales | 8,888 | 8112 | 11239 | |||
| % of Revenues | 17.8 | 16.8 | 23.2 | |||
| Selling and administrative expenses | 14,875 | 14537 | 15626 | |||
| % of Revenues | 29.7 | 30.1 | 32.3 | |||
| R& D expenses | 7845 | 7945 | 8089 | |||
| % of revenue | 15.7 | 16.5 | 16.7 | |||
| Amortization of intangible assets | 2877 | 2668 | 3128 | |||
| % of revenue | 5.8 | 5.5 | 6.5 | |||
| Acquisition related charges | 68 | 633 | 283 | |||
| % of revenue | 0.1 | 1.3 | 0.6 | |||
| Restructuring charges | 4337 | 2675 | 2534 | |||
| % of revenue | 8.7 | 5.5 | 5.2 | |||
| Other (income) deductions- net | 292 | 2032 | (1759) | |||
| Income from operations before tax | 10827 | 9694 | 9278 | |||
| % of revenue | 21.7 | 20.1 | 19.2 | |||
| Provision for taxes on income | 2197 | 1645 | 1023 | |||
| Effective tax rate | 20.3 | 17.0 | 11 | |||
| Discontinued operations- net of tax | 14 | 78 | (69) | |||
| Less: net income to non controlled interests | 9 | 23 | 42 | |||
| Net income attributable to Pfizer Inc | 8635 | 8104 | 8144 | |||
| % of revenue | 17.3 | 16.8 | 16.8 | |||
The form of acquisition
The form of the acquisition is absorption of one company by the other, Pfizer and Wyeth. Pfizer being the acquirer absorbed Wyeth retained its name and identity and it acquired all the assets and liabilities of the acquired firm, in this case, Wyeth thereby absorbing the acquired firm
Analysis of special issues related to Business Consolidation
Insolvency during Liquidation
The law of insolvency aims at creditors right protections, while at the same time safeguarding the customers and shareholders of company interests. Insolvency law, therefore, is a very special aspect, in that it helps instill discipline and honesty in managing financial matters during the consolidation process. It also provide orderly exit of inefficient businesses from the market (Bhagwati, 2004). During acquisition, the agreement must clearly indicate, date, place, major agenda of the new company’s shareholder first meeting subsequent to a consolidation. During this first meeting, the charter of the consolidated company shall be adopted by the shareholders, and the board of directors elected.
The commissioner shall henceforth examine whether there is a violation of the company on its charter, or the state law or is conducting an illegal business for approval, the commissioner will also ensure that the controlling officers of the company submit its books and papers to the inspector of the commissioner and be examined on his concerns, business activities after which the commissioner will either take possession of its property and pronounce its certificate of authorization as null and void
On taking possession of the property and business, commissioner has the mandate to collect its money due to it and those other acts aimed at the conservation of its assets and business, and to liquidate the business affairs thereof, if it cannot safely resume business accordingly as presumed by the commissioner as hereinafter provided.
Moreover, the commissioner shall henceforth give notice of that fact to any and all other corporations, associations, partnerships, and individuals holding, any of its assets, but this knowledge will not grant them a lien or charge for any payment, advance, or clearance thereafter made, or liability thereafter incurred against any of the business assets the commission has taken possession of (Bhagwati, 2004). But the commissioner may at some time grant consent to the resumption of the business upon satisfaction of certain conditions as approved by him.
Consolidation during Liquidation
It is a requirement that any business on liquidation may, with the consent of the commissioner, consolidate with any other company or business, on fulfilling such terms and conditions as authorized by their boards of directors respective to them and with the, consent of a majority of the stockholders, and may transfer to such business or company its entire assets, subject to its existing liabilities.
Reorganization during Liquidation
The commissioner, with an aim of restoring the solvency of any company he is taking charge of pursuant to the company law approve the reorganization plan entered into by the shareholders of a company and its unsecured creditors, following which, the company reorganizes. This represents 90 percent of the amount as shareholders and unsecured creditors claim of the company and in such events, both the shareholders and the unsecured creditors are held responsible subject to the same agreement and to the same extent and the same effects as if they had joined in the execution thereof. Their claims shall also be treated in the same manner as if they had joined in the plan to reorganize the company in the event of the company restoration to insolvency or in the execution of the articles.
Change of ownership during Liquidation
During liquidation, a certificate showing a change of name of the business or merger is recorded by the relevant authorities, although not constituting a change in legal entity they are proper link in the chain of title.
Key differences between IFRS and U.S. GAAP
U.S. GAAP recognizes acquired intangible assets at a fair value, IFRS, on the other hand only recognizes the acquired intangible asset at fair value should they have a future economic benefit and measured reliability. In accounting for inventory, IFRS allows for the use of FIFO while U.S. GAAP employs the use of either LIFO or FIFO in estimating inventories.
When inventory has been written down, IFRS allows for the future reversal in any case a designed criterion is not met, while U.S. GAAP prohibits any reversal of inventory once they have been written down. These differences, for example, employment of a single inventory costing method could lead to increased comparability removing the need for adjustment of LIFO inventories by analysts thereby increasing the profitability of the firm.
Similarities between IFRS and U.S. GAAP
Both IFRS and U.S. GAAP records accounting estimates in the income statement in the current and the future periods. Both of them acknowledges the use of a purchase method as the only method of accounting during business combination. Both of them employ equity method and show the share of post-tax results in presenting associate results. In both of them require the disclosure of detailed information concerning the assets, liabilities, revenues and profit and loss of the associates.
References
Bhagwati, J., (2004). In Defense of Globalization. Oxford: O U P.
Get Professional Assignment Help Cheaply
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Why Choose Our Academic Writing Service?
- Plagiarism free papers
- Timely delivery
- Any deadline
- Skilled, Experienced Native English Writers
- Subject-relevant academic writer
- Adherence to paper instructions
- Ability to tackle bulk assignments
- Reasonable prices
- 24/7 Customer Support
- Get superb grades consistently
Online Academic Help With Different Subjects
Literature
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Finance
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
Computer science
Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!
Psychology
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
Nursing
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Sociology
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
Business
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
Statistics
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Law
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
What discipline/subjects do you deal in?
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Are your writers competent enough to handle my paper?
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
What if I don’t like the paper?
There is a very low likelihood that you won’t like the paper.
Reasons being:
- When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
- We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.
In the event that you don’t like your paper:
- The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
- We will have a different writer write the paper from scratch.
- Last resort, if the above does not work, we will refund your money.
Will the professor find out I didn’t write the paper myself?
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
What if the paper is plagiarized?
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
When will I get my paper?
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
Will anyone find out that I used your services?
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
How our Assignment Help Service Works
1. Place an order
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
2. Pay for the order
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
3. Track the progress
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
4. Download the paper
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!
