The project is a study of the Merger between United Airlines and Continental Air
ID: 2396817 • Letter: T
Question
The project is a study of the Merger between United Airlines and Continental Airlines. There are five questions related to the merger. Although the merger was initiated in 2010 many issues still exist today in 2018 related to that merger.
Suggested Sources:
Goggle the Merger, United Airlines SEC 10K report, Audited Financial Statement for years 2010 and thereafter- the section of Notes. You may start your review with the following Google search.
http://www.nytimes.com/2010/05/03/business/03merger.html?mcubz=3
1. How was the merger between United and Continental structured? Which is the survivor? Who holds what stock after the merger?
2. What accounting method was used to account for the merger of Continental and United? What are the reporting implications?
3. What items of value did Continental bring to the merger that will not be recorded in the acquisition?
4. How will the items of value that Continental brought to the merger in #3 affect future reported income for the combined firm?
5. In your opinion was this a successful merger? Which company do you think gained the most benefit? Why.
Explanation / Answer
Amalgamation means union of two or more existing companies into one company, the joined companies lose
their identity and form themselves into a new company.
In absorption, an existing company takes over the business of another existing company. Thus, there is only one liquidation and that is of the merged company.
A company which is merged into another company is called a transferor company or a vendor company.
°ACCOUNTING METHOD USED TO ACCOUNT FOR MERGER ARE
There are two main methods of accounting for
amalgamation:
A) The pooling of interests method, and
B) The purchase method.
C) Under pooling of interests method, the assets, liabilities
and reserves of the transferor company will be taken over by the translferee company or existing carrying company
Under purchase method,
the assets and liabilities of the
transferor company should be incorporated at their existing
carrying amounts or the purchase consideration should be
allocated to individual identifiable assets and liabilities on the
basis of their fair values at the date of amalgamation
Some of the advantages of merger are
Some of the company's gained by Merger are
Tata acquisition of steel group
Vodafone idea merger
Flipkart acquisition of ebay
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