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The client needed to understand and apply the correct accounting treatment for two events: (1) the acquisition and (2) the debt restructuring. The latter raised specific concerns: Given some underperformance in areas of the business, the debt changes could qualify as a troubled debt restructuring (TDR)—a treatment with significant reporting consequences. The client’s accounting team lacked both the technical depth and the capacity to address such intricate issues.
We broke the transaction into two separate accounting workstreams: business combination accounting for the acquisition, and recapitalization accounting for the restructuring. Using our proven methodology, we rapidly completed the purchase accounting, delivering required entries and documentation to satisfy external auditors.
Anticipating auditor concerns around the potential classification as a TDR, we proactively conducted a dedicated analysis. We aligned with the audit team early in the process, confirming agreement on the appropriate non-TDR treatment before diving deeper into the recapitalization details.
Because US GAAP offers limited specific guidance on these types of dual transactions, our approach was initially met with scrutiny. However, we presented a reasoned and well-supported position to the local audit team, who then escalated it to reviewers in their national office. Ultimately, our approach was accepted at all levels.
The client benefited from a streamlined and simplified post-transaction accounting process, backed by well-documented technical analysis. They especially valued our ability to engage directly with auditors and resolve questions in real time. Our credibility with a Big Four national office helped the client feel confident in the practicality and defensibility of the accounting outcomes.