Healthcare Mergers & Acquisitions Accounting Flashcards

A health system uses pooling of interests to account for a merger. Under current US GAAP, which statement is correct?

Answer: Pooling of interests was eliminated by SFAS 141 and is no longer allowed under US GAAP

SFAS 141 (now ASC 805) eliminated the pooling-of-interests method; all business combinations must use the acquisition method.

When allocating the purchase price in a healthcare acquisition, which of the following is NOT a separately identifiable intangible asset under ASC 805?

Answer: Assembled workforce

Assembled workforce does not meet the separability or contractual-legal criteria to be recognized as a distinct intangible asset under ASC 805.

In a healthcare acquisition structured as an asset purchase (vs. stock purchase), what is the primary tax advantage for the buyer?

Answer: The buyer receives a stepped-up tax basis in acquired assets, enabling higher depreciation deductions

In an asset purchase, the buyer gets a stepped-up tax basis equal to the purchase price, allowing accelerated depreciation and amortization deductions.

A healthcare private equity firm acquires a hospital chain and records $50M of goodwill. Under ASC 350, annual goodwill impairment testing requires:

Answer: Comparing the reporting unit's fair value to its carrying amount

ASC 350 requires comparing the fair value of the reporting unit to its carrying amount; if fair value is less, impairment is measured as the excess of carrying value over fair value.

In a two-step healthcare acquisition where the acquirer previously held a 30% equity interest, ASC 805 requires:

Answer: The prior interest to be remeasured to fair value at the acquisition date, with gain or loss recognized

When a step acquisition achieves control, the previously held equity interest is remeasured to fair value on the acquisition date and any resulting gain or loss is recognized in income.

Which of the following transaction costs must be expensed as incurred in a healthcare M&A deal under ASC 805?

Answer: Legal and advisory fees paid to investment bankers

Under ASC 805, legal, advisory, and due diligence fees are expensed as incurred; debt issuance costs follow ASC 835-30 and are capitalized separately.

A health system acquires a behavioral health network and records $8M for a 'Certificate of Public Advantage' (COPA) as an intangible. What is the most appropriate useful life determination?

Answer: Based on the contractual term or renewal period of the COPA agreement

The useful life of a regulatory approval like a COPA is based on its contractual term and any renewal provisions, similar to licenses.