Business Combinations of Czech Companies: Empirical Analysis of Their Typology

Abstract

This paper is a descriptive study which analyses company transformations -a subset of M&A -which took place in the Czech Republic in 2013. Based on the statistical sample containing detail data of 115 transformations, we analysed important aspects of company transformations (M&A) such as ownership structure of the participating companies, deployment of the effective date, acquisition date, balance-sheet date, date of registration and transformation project date, utilization of available forms of company transformations, utilization of financial statements for transformation purposes and incidence of fair-value revaluation. The results of the research shows, that majority of company transformations are in fact corporate holdings reorganisations rather than business combinations as defined by IFRS 3 and it also suggests that the rules for accounting for these transactions are in fact misused for distribution of earnings (even unrealized earnings) through the corporate holdings. We have also identified cases of severe distortion of faithful representation of successor's company financial position, most often as a result of retrospective company transformations, where the effective day of the merger was put before the date of acquisition of the majority on target's equity.

An Empirical Examination of Accounting Comparability: Goodwill Recognition and Disclosure in Selected Central European Countries

“…Poland, the Czech Republic, and Slovakia are neighbouring post-communist countries located in Central Eastern Europe; they all experienced similar economic transformations following the entire system change that took place at the end of the 20 th century. Each country maintained a legal accounting system that constitutes a compilation of previous and new IFRS solutions, former obsolete IFRS standards only, or their old local regulations, despite their incompatibility with existing IFRS (Pospíšil and Vomáčková, 2017;Pospíšil and Vomáčková, 2018). Because there are considerable similarities in overall institutional systems and changes in the accounting laws in these three countries, accounting regulations provide an interesting setting for examining the theoretical background and legislature related to a specific item disclosed in financial reports.…”