The SFAS 141 (R) Standard will require all M&A activities to quantify environmental liability immediately.
What is the Significance of SFAS 141(R)?
SFAS 141(R) continues the evolution toward fair- value reporting, and extends the fair-value requirements to new areas, including mergers, acquisitions and divestitures. Most significant and controversial, is the value of acquired contingencies (e.g. environmental issues, litigation, warranty payouts) now must be estimated on the acquisition date (Day 1). Previously, environmental liabilities were not typically recorded until a dollar amount was probable and estimable. This approach will increase the importance of thorough environmental due diligence during M&A efforts and require that environmental liabilities be quickly and accurately quantified.
How Can EHS Support Help?
SFAS 141(R) creates major changes in the accounting for M&A related transactions, and requires environmental issues be immediately quantified to better establish their impact on the value of the deal. Even if you have no M&A activity planned in the near-term, the standard may still affect your business planning. EHS Support’s proprietary environmental liability model allows our staff to provide fast, accurate, and reproducible liability estimates that allow you to get model allows our staff to provide fast, accurate, and reproducible liability estimates that allow you to get your deal completed, profitably! Call us today for a broader discussion on how this standard impacts your business.
Notable Features and Impact of SFAS 141 (R)
- Quantifying your environmental risks are front-burner issues, given the potential impact upon the value of the deal, including potential goodwill gain recognition with bargain purchases.
- For valuation purposes, the measurement date is now the closing date, as opposed to when the deal was announced. This complicates deals that are fully or partially funded by stock.
- Acquisition costs (e.g. transaction
- Acquisition costs (e.g. transaction costs and restructuring charges) are expensed immediately, and no longer capitalized and amortized.
- Joint Ventures are not subject to the standard.
EHS Support has teamed with Alpern Rosenthal and Egan & Associates and to ensure that we can assist you with
managing this new business risk from both an environmental and a reporting perspective.