Accounting Case: Facebook – WhatsApp Acquisition (1445 words)

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The research project on Facebook acquisition case.
The course of advanced Financial Statement Analysis
Read financial statements of the facebook and whatsapp recent acquisition.
Research Project on Purchasing Price Allocation: Facebook and Whatsapp

Facebook first announced the acquisition of Whatsapp in Feb. 2014; the acquisition was officially completed on Oct. 6 2014. In the media, however, the acquisition price was reported differently at different time points.
Required:
a. Give at least three clear citations of the purchasing price, reported at different time points.
b. Give a discussion of the causes of the differences; that is, to explain the cited numbers reported at different time points. What are they different? Which one is actually used in their 2014 financial reporting?
c. Explain the difficulties faced by Facebook in reporting this acquisition transaction, addressing the purchasing price allocation issues in this acquisition.
d. Address the difficulties that the accounting-standard setters are facing; that is, if you have the chance to set accounting standards, what are some of the considerations (address issues such as the technical issues, the ethical issues, financial presentation issues…….)?

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On October 2014, Facebook acquired the largest mobile messaging app, WhatsApp. This resulted to a huge cash outflow for the acquiring company but also led to the rise in its stock prices. Many news agencies covered this particular story and reported different figures on the price. There were also varying opinions on whether the deal was overpriced or at a bargain in comparison with its revenue outlook in the coming years. As such, the details and general accounting challenges related to the Facebook-Whatsapp acquisition are discussed in the following paragraphs.

a. Give at least three clear citations of the purchasing price, at different time points.

On February 19, 2014, The New York Times reported the acquisition price at $16 billion.

Facebook Enters $16 Billion Deal for WhatsApp

“The frenzy to acquire fast-growing technology start-ups reached new heights on Wednesday as Facebook announced its largest acquisition ever, saying it would pay at least $16 billion for WhatsApp, a text messaging application with 450 million users around the world who pay little or no money for it.”

On October 7, 2014, Forbes reported the acquisition price at $19 billion.

Facebook Closes $19 Billion WhatsApp Deal

“Facebook says it has wrapped up its landmark $19 billion acquisition of WhatsApp, a deal that was hashed out in Mark Zuckerberg’s house over...
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