Acquisition accounting meaning

Prepared for purchasers, this checklist aims to flag routinely encountered issues and the key questions to pose when carrying out due diligence on the purchase of a software business. Comparable considerations arise whether the deal is an asset purchase or a share sale (with distinctions indicated where relevant). Its emphasis is on software assets and related intellectual property (IP) within the transaction, and it is meant to sit alongside due diligence enquiries in other fields, including general corporate, accounting, tax, and overall financial position. The buyer’s reasons for acquiring the business will determine the scope and character of the due diligence that ought to be undertaken. This is not the same scenario as acquiring a non-IT business that merely owns some IT and IP assets, for example IT systems and a trade mark. Differences are noted where appropriate to ensure clarity for the buyer’s evaluation and risk assessment during the process at each stage...

Nellsar Ltd v HMRC [2025] UKUT 164 (TCC) Nellsar had purchased five care homes as going concerns. On each transaction, its financial statements apportioned the consideration between goodwill and the freehold estate by reference to DRC, with a modest allocation to fixtures and fittings, which was uncontroversial. As amounts booked as goodwill in GAAP-compliant accounts attract amortisation relief for corporation tax, Nellsar benefited from attributing a larger slice to goodwill, and the disagreement therefore turned on the proper accounting treatment, for corporation tax purposes, of goodwill arising on these acquisitions. Upholding the FTT’s approach, which placed a greater proportion of the price on the properties and consequently reduced the goodwill, the UT stated that there was ample evidence supporting the FTT’s conclusions—namely, that GAAP, and in particular FRS 7.9(a), mandated use of the market value of the care home properties rather than their DRC. The UT further held that there was sufficient material to support the FTT’s finding that operational care homes were ‘assets similar in type and condition’...

Corporate intangible assets regime — general rule Under Part 8 of the Corporation Tax Act 2009, a company’s profits and losses on intangible fixed assets are taken into account for corporation tax as credits and debits in accordance with the accounting treatment of those assets. In essence, GAAP-compliant accounts form the foundation for determining the taxable and relievable amounts connected to a company’s IFAs. This is often summarised as ‘tax follows the accounts’. There are, however, several exceptions where the corporate intangible assets rules require a departure from the accounting outcome, with IFA credits and debits calculated on a different footing. For broader guidance on the taxation of IFAs, see Practice Note: How intangible fixed assets are taxed—basic principles. Relevant assets One instance where the legislation moves away from relying on the company’s accounts concerns ‘relevant assets’. A relevant asset is: goodwill in a business or part of a business an IFA that consists of information which relates to customers ...

The need to value employee shares When contemplating offering shares to employees, whether directly and/or via a share plan, employer companies and existing shareholders must reflect on what the shares are worth for several reasons, including: determining how many shares are needed to meet their objectives (valuing existing shares can indicate a need to sub-divide current shares and/or establish a new class) assessing the tax that may arise on acquisition and on any later chargeable events (for example, for PAYE purposes and/or to enable an employee and the company to decide whether to make an election in relation to restricted shares), particularly in respect of: convertible securities restricted securities securities with artificially depressed or enhanced market values securities acquired for less than market value, and securities disposed of for more than market value providing information to an employee acquiring restricted shares and to the employing company that is considering entering...

When a company launches a new plan, it will typically decide to settle awards by either: issuing fresh shares, or using existing shares bought on the market, commonly via an employee benefit trust (EBT) that purchases shares in the market or from individual shareholders to satisfy awards granted under the company’s share plans This practice note examines share hedging in the context of an employee share plan and outlines the key points to address to manage potential costs and the financial risks associated with share hedging. In essence, a company must balance: the need to acquire enough (but ideally not excess) shares ahead of option exercises/acquisition of shares by employees, and the need to contain costs by buying when the share price is low Why do companies use EBTs to share hedge? Companies operating share plans (for example through the grant of options or conditional share awards and/or direct share acquisitions) often need to...

COMPANY NUMBER: [ insert number ] [ insert company name ] PLC Minutes of a meeting of the board of directors (the Meeting) of [ insert full name of company ] (the Company) convened at [ insert place of meeting ] on [ insert day, month and year of meeting ] at [ insert time of meeting ] [ am OR pm ] PRESENT: [ Insert names of the director(s) physically present ] [ [ Insert names of any directors present by telephone as permitted by the Company’s articles of association ] (by telephone) ] [ [ Insert names of any directors present by other means permitted by the Company’s articles of association ] by [ insert other means ] ] [ IN ATTENDANCE: ] [ [ Insert name of anyone in attendance, who does not count towards the quorum for the Meeting (eg the company secretary, any legal advisers) ] ] [...

This Agreement is entered into on [ insert date of agreement ] between the following parties: [ insert name of company ] (registered number [ insert registered number of company ]), with its registered office at [ insert registered address of company ] (the Company); and [ insert name of shareholder ] of [ insert address of shareholder ] (the Shareholder). Background (A) The Shareholder is the registered holder of [ insert number of shares ] [ insert class of shares ] in the Company. (B) The Company [ operates OR intends to operate ] the [ Insert the name of the employee share plan that the Company operates ] (the Plan), under which rights to acquire certain shares in the Company's capital [ have been granted OR will be granted ] by the Company. (C) The Company has asked the Shareholder to enable the acquisition of shares in the Company by, or for the benefit of, current...