Current Developments in Accounting Thought
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Added on 2019-10-31
Current Developments in Accounting Thought
Added on 2019-10-31
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1Running head: CURRENT DEVELOPMENT IN ACCOUNTING THOUGHTCurrent Development in Accounting ThoughtAuthor’s NameInstitution Affiliation
2CURRENT DEVELOPMENT IN ACCOUNTING THOUGHTCurrent Development in Accounting ThoughtAnswer to Question 1OverviewThe article written by Michael Cohn published in Accounting Today on September 11, 2017 highlights upon the expansion plans of Eide Bailly LLP, which is included under the leading 100 CPA firms located in Utah, a state in western part of the United States. Eide Bailly is looking forward to acquire a small CPA firm, named as Hawkins Advisors effectively on 30th October 2017 (Cohn, 2017). The main headquarter of Eide Bailly is located in Fargo, N.D. along with branches in Ogden, Utah and Lehi, Salt Lake City (Cohn, 2017). It was mentioned that after the completion of the deal, the company will result in making Eide Bailly the biggest CPA organization in Utah considering the total number of staff (Eide Bailly, 2017a). Additionally, financial terms with respect to the deal were not disclosed yet. Moreover, Eide Bailly has merged with other since last year including Langenhorst & Self-Merritt CPAs P.S., Daines Goodwin & Co, JW Advisors and Bryce Wisan’s CPA practice along with adding Rauch Hermanson & Everroad Ltd. in their organization (Eide Bailly LLP, 2017). The objective of this study is to provide an in-depth theoretical understanding of the article present by Cohn (2017) for assisting the company to engage themselves efficiently in the upcoming future.Related Theories of AccountingThe article review is briefly focused on the situation, which highlights merger and acquisition process considering the accounting principles along with standards. Merger and acquisition is an essential part of corporate finance, as it helps the business to grow successfully. Merger is a strategic tool helping two or more companies to combine and form asingle large organization, where one company will gain the ultimate power and the other will lose its corporate existence (Kansal & Chandani, n.d.). Multinational corporations are
3CURRENT DEVELOPMENT IN ACCOUNTING THOUGHTfocusing on mergers and acquisitions up to higher levels, which will lead to achieving organizational growth. Mergers are often considered as a value maximizing initiative, which assits in increasing the shareholder’s wealth as well as financial synergy (Cartwright & Cooper, 2014). Additionally, acquisition is the process, where a bigger organization takes complete control of the smaller organization. Hence, merger and acquisition refers to the integration of two or more organizations aligned with diverse cultures, values, forces and converts them into a single cohesive unit. Moreover, mergers can be of two different types including horizontal merger and vertical merger (Kansal & Chandani, n.d.; Andrade, Mitchell& Stafford, 2001). Horizontal merger can be defined as an involvement of organizations working in the same field, whereas vertical mergers are those where the field of works differs considering both the companies. Merger is a long process, which significantly requires extensive support from both the organizations for the proper development of business. There are few factors, which are necessary for maintaining the balance between the merged organizations due to thedifference in cultures and will, as they can have potential impacts on the operations. Therefore, the factors influencing the organizations during mergers and acquisitions include system dynamics, person-focused change, structure-focused change, government policies along with profitability issues (Kansal & Chandani, n.d.; Roundy, 2009). In addition, a merger cannot be successful, if only judged from a financial perspective. Active involvement of both the companies into one is necessary for smoother transition process of the business. Some of the additional challenges faced during the transition process are stress management, cultural management, HR restructuring, job insecurity, resistance towards change, redundancies, low motivation as well as talent drainage among others (Kansal & Chandani, n.d.; Ferreira, Santos, de Almeida & Reis, 2014). Furthermore, there are few reasons behind the failure of merger and acquisitions, which includes lack of proper communication, support
4CURRENT DEVELOPMENT IN ACCOUNTING THOUGHTalong with lack of confidence on each other, frustration and confusion. It also includes forceful habit, loss of competency as well as fear of working with new set of individuals aligned with different behaviors. Therefore, it becomes necessary for the leaders to manage the situation along with bringing it to normal. Therefore, leaders can focus on overcoming thesituation of resistance to change through planning and implementing strategies. Some of these strategies include clear vision, integration plan, employee involvement, customer focus and understanding the differences in culture and downsizing. These strategies will ensure successful implementation of the merger and acquisition processes (Kansal & Chandani, n.d.;Roundy, 2009). Application of TheoryApplying the theoretical concepts of merger and acquisition, it is clearly explainable that Eide Bailly, being a larger organization is acquiring the Hawkins advisors, which is a smaller in size. Here, it is evident that a horizontal merger will be taking place between Eide Bailly and Hawkins Advisors as both works under the field of accounting practice, commonlyknown as Certified Public Accounting (CPA) firm. Both the companies may have different cultures, but the field of work is same. Here the acquisition will not be forceful as Hawkins Advisors have agreed to the offered presented by Eide Bailly. Hawkins Advisors has mentioned that they will benefit by merging with Eide Bailly, as joining them will help in delivering world-class services for the existing businesses along with the in Utah. Eide Baillywill have to take essential steps to motivate the partners along with the staff of Hawkins Advisors for joining their company (Kansal & Chandani, n.d.;Cohn, 2017). Moreover, it was mentioned that the viewpoint considering financial aspects is not important, as compared to their active involvement. Here, the acquisition will not provide financial benefit to Eide Bailly to achieve high level of profit, but it will definitely assist the company to become the leading CPA organization in Utah considering the amount of team
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