Corporate Accounting Report: Boral's Headwaters Acquisition Analysis

This report analyzes the acquisition of Headwaters by Boral, a publically listed company on the Australian Stock Exchange. The acquisition, driven by diversification and strategic goals, involved a 100% share purchase. The report details the accounting methods used, including the acquisition ...Read More

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student
Name of the University
Author Note

1CORPORATE ACCOUNTING
The acquisition mechanism is a corporate action in which one entity buys most, if not
all, ownership stakes of another firm to assume control of it. The acquisition occurs when a
buying company obtains more than 50% ownership in an entity. In the present case of Boral
acquiring headwaters, the company which is acquiring purchased the target company's stock
and other assets, which allows the acquiring entity to make decisions regarding the newly
acquired assets without the consent of the target shareholders of the company. The price of
the acquisition may be in terms of cash or shares (Brueller, Carmeli & Markman, 2018)
Reasons for the acquisition
Boral limit which is a public listed company under the Australian Stock exchange that
has acquired the Headwaters incorporation that is a product manufacturing marketer in North
America. After a long period of due diligence, the board of directors decided to offer a long
term value creation for shareholders (Barney, 2014).
The purpose for the Acquisition
This acquisition would provide a strong fit with the company’s existing business and
would enable the company to achieve their strategic goals efficiently and effectively (Zhang,
et al., 2015).
The Boral limited acquired the Headwaters for the following reasons:
 For Diversification of the business and Sharpening Business Focus
 To enable growth
 In order to eliminate competition
 To increase the supply-Chain Pricing Power
Purchase Considerations

2CORPORATE ACCOUNTING
At the time of consolidation on November 2016, the group of Boral limited acquired
100% of the shares of Headwaters incorporated. The total consideration that has been
transferred includes cash price of $3611.6m, the non-controlling interest of $ 25m and the
amount of goodwill that amounted to $ 2257.4m
Accounting methods used for Investment
The financial statements that have been prepared for the acquisition are acquisition
cost statement with respect to Headwaters incorporated acquisition, purchase price
accounting on financial performance of the year (Angwin & Meadows, 2015). When the
acquisition takes place of another company and the acquirer uses GAAP, the acquirer must
record the event using the acquisition method. In the acquisition process the series of steps
to record the acquisitions that are:
 Measurement of the liabilities and tangible assets that were acquired by Boral
 Measure of the liabilities and intangible assets that were acquired by Boral(Brueller,
Carmeli & Markman, 2018)
 Measurement of the amount of any non-controlling interest in the acquired business
by Boral
 Measurement the amount of consideration paid to the Headwaters incorporated.
 Calculation of the any gain on the transaction or goodwill
Implication on the financial statements due to the acquisition
The acquisition related cost that have been incurred amounts to $63.2 million are
included in the other expense in the income statement. The cash payment of $82 million are
included in the cash flow statement under the head of operating cash flows. In the
consolidated balance sheet the good will of $ 2171.5 million has been recorded in the asset
side.

3CORPORATE ACCOUNTING
The changes in the revenue after the acquisition is shown in the following table:
BORAL LTD (BLD) INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per share data. 2016-06 2017-06
Revenue 4311 4258
Cost of revenue 2927 2858
Gross profit 1384 1399
Operating expenses
Sales, General and administrative 1122 1065
Restructuring, merger and acquisition
Other operating expenses 247 260
Total operating expenses 1369 1325
Operating income 15 75
Interest Expense 70 75
Other income (expense) 339 301
Income before taxes 284 301
Provision for income taxes 32 51
Net income from continuing operations 252 250
Net income from discontinuing ops 4 47
Other
Net income 256 297
Net income available to common shareholders 256 297
Earnings per share
Basic 0.32 0.29
Diluted 0.32 0.29
Weighted average shares outstanding
Basic 802 1018
Diluted 812 1024
EBITDA 601 636
The changes in the balance sheet has been shown below:
BORAL LTD (BLD) BALANCE SHEET
Fiscal year ends in June. AUD in millions except per share data. 2016-06 2017-06
Assets
Current assets
Cash
Cash and cash equivalents 452 238
Short-term investments 19 4
Total cash 471 242
Receivables 589 866
Inventories 557 607
Other current assets 67 49
Total current assets 1684 1764
Non-current assets
Property, plant and equipment

4CORPORATE ACCOUNTING
Gross property, plant and equipment 5576 5633
Accumulated Depreciation -3059 -2877
Net property, plant and equipment 2518 2756
Equity and other investments 1078 1386
Goodwill 213 2275
Intangible assets 22 934
Deferred income taxes 237 128
Other long-term assets 49 72
Total non-current assets 4116 7550
Total assets 5800 9314
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 359 414
Capital leases 1 9
Accounts payable 608 812
Deferred income taxes 37 64
Other current liabilities 177 169
Total current liabilities 1182 1468
Non-current liabilities
Long-term debt 1009 2168
Capital leases 3 6
Deferred taxes liabilities
Deferred revenues 31
Pensions and other benefits 11 44
Minority interest
Other long-term liabilities 59 186
Total non-current liabilities 1112 2405
Total liabilities 2294 3873
Stockholders' equity
Common stock 2246 4265
Other Equity 64 45
Retained earnings 1098 1156
Accumulated other comprehensive income 98 -26
Total stockholders' equity 3506 5440
Total liabilities and stockholders' equity 5800 9314

5CORPORATE ACCOUNTING
References
Angwin, D. N., & Meadows, M. (2015). New integration strategies for post-acquisition
management. Long Range Planning, 48(4), 235-251.
Barney, J. B. (2014). Gaining and sustaining competitive advantage. Pearson higher ed.
Brueller, N. N., Carmeli, A., & Markman, G. D. (2018). Linking merger and acquisition
strategies to postmerger integration: a configurational perspective of human resource
management. Journal of Management, 44(5), 1793-1818.
Zhang, J., Ahammad, M. F., Tarba, S., Cooper, C. L., Glaister, K. W., & Wang, J. (2015).
The effect of leadership style on talent retention during merger and acquisition
integration: Evidence from China. The International Journal of Human Resource
Management, 26(7), 1021-1050.