Guide to internal controls in business combinations released

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Financial Executives International and its Committee on Corporate Reporting have released a new guide on internal control considerations for business combinations.

The new guide, which is part of an "ICFR: Insights, Issues, and Practices" series, provide information to help companies focus their internal control efforts related to business combinations on areas that present risks of material misstatement.

Because of the complications of business combinations, many preparers put in a significant amount of effort designing controls and developing documentation to operate an effective system of internal control at the time of a business combination and post-acquisition.

The goal of the guide is to provide an overview of how to design and operate the right controls related to business combinations. The guide addresses internal control considerations pertaining to the valuation of assets acquired and liabilities assumed, consolidations, manual journal entries, measurement period adjustments, accounting policy alignment, control environment integration, and disclosures. The information includes insights, best practices and general recommendations.

“Maintaining and implementing effective internal controls is one of management’s most important responsibilities, “ stated CCR chairman Prat Bhatt, who is senior vice president, chief accounting officer and corporate controller at Cisco Systems. “Business combinations is a particularly challenging area for internal controls where management must pay close attention. This ICFR guide represents the collaborative efforts of leading preparers, with input from their auditors. We believe this will help refresh the dialogue between management and its auditors, leading to process improvements, better internal controls, and efficiencies,”

"ICFR: Insights, Issues, and Practices: A guide to designing and operating an effective system of internal control over business combinations" can be downloaded from the FEI website here.

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Internal controls FEI M&A Integrations Cisco