When an earnout is to be used in an acquisition, the parties must resolve the accounting, tax and securities issues involved

Article Abstract:

Businesses structuring their mergers and acquisitions as earnouts promise additional payments if the acquisition performs as well as expected. The agreement must, however, be very carefully structured. Parties must determine the definition of the business unit whose performance will be measured as well as what accounting measures to use to define the performance. Which party will determine whether the target has been reached must also be agreed on. Who will be in control of the desired business must also be decided on. Other factors are listed.

Management, Acquisitions and mergers, Corporate reorganizations

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The new Securities Litigation Reform Act should prompt a re-evaluation of the form and content of corporate disclosures

Article Abstract:

The Securities Litigation Reform Act of 1995 suggests at least six steps corporate counsel should take. Good relations with major institutional investors will be even more important. Companies should keep a record of how difficult disclosure issues are resolved, and disclosures should be updated regularly even when there is no requirement to do so. An effective system for disclosure is even more important now, as is a policy on retaining and destroying documents. Auditors and companies now have a changed relationship.

Disclosure (Securities law)

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For outside accountants, the new obligations imposed by the securities litigation reform act go way beyond classical GAAS

Article Abstract:

The Securities Litigation Reform Act of 1995 imposes on accountants reporting obligations more stringent than the generally accepted auditing standards, should management not respond appropriately when told of illegalities. The act requires accountants to report to the board of directors and then the SEC if appropriate remedial action is not taken. Companies should make every attempt at remediation before a report to the SEC takes place. Possible procedures are detailed.

Prevention, Accountants, Securities fraud

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