Quick win: M&A

One of management’s key roles is capital allocation. Investment professionals need to be able to judge how successful M&A activity has been relative to the other investment opportunities.

Why M&A information is important to the CRUF

Given the size and significance of many M&A transactions, we encourage management to provide us with enough information to assess the value created through such activities. In the absence of a clear description of how value has been extracted from the significant sums invested in M&A, it is hard for investors to have confidence that the return on such investment is sufficient.


The CRUF would welcome more detailed disclosures following M&A activity, particularly in relation to liabilities assumed, fair value adjustments and assumptions, intangibles, and how acquisitions are managed. This would contribute to better understanding of the impact on long-term value.

The current problem with disclosures and what the CRUF would like to see

Click the tabs below to reveal what CRUF would like to see for each of these current problems

Inadequate disclosure

Disclosures following M&A activity are not detailed enough, particularly around accounting estimates. With the average CEO tenure continuing to fall, there is an incentive to act in the short term. Without adequate disclosure around accounting estimates, the user is unable to determine whether or not this is the case.

Clear disclosure of the liabilities assumed in acquisitions, such as debt acquired, pension liabilities assumed etc. While this is required by IAS 7, disclosure quality is variable, and this detail will allow further analysis of the ‘value’ of the acquisition. 

Fair value adjustments and assumptions

The amount of any fair value adjustments made as part of the acquisition accounting for the transaction (e.g. the ‘step up’ in inventories or PP&E) and the assumptions used would be helpful to allow us to assess the amount of future profits that stem from valuation changes versus operating income.


A clear description of the intangibles acquired. In particular, we would like to be able to distinguish between those acquired assets that have a finite life (e.g. a patent) and those that are sustained through expenditure that goes through the income statement (e.g. customer lists and brands). This, together with a breakdown of significant components of amortisation, will allow us to determine whether we wish to reverse the associated amortisation charge or not. Similarly, where acquired goodwill is subsequently impaired, it would be useful for companies to be clearer in their disclosure about what specific acquisition the impairment relates to and what led to the impairment. 

How acquisitions are managed

Management will typically discuss the strategic rationale for any acquisition made. However, once the acquisition has been finalised, it can be difficult to assess whether the stated strategic ambitions have been met. We would welcome clear disclosure of the financial returns from the acquired assets or businesses. However, we recognise that integration often means that it is sometimes difficult to identify returns specifically attributable to them. In the absence of such information, we appreciate any insight – perhaps through non-financial metrics – that companies can provide to give information about the skill and discipline with which they manage acquisitions

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