22320 Accounting for Business Combinations
22320 Accounting for Business Combinations
Spring 2023
Group Assignment
Introduction
The aim of the group assignment is to enhance students ability to conduct independent research and apply the knowledge and skills learned in this subject to evaluate various facets of real-world merger and acquisition transactions. Students will also have the opportunity to work in groups in preparing a written report of their findings using a format similar to that used by professional consultants in addressing business problems.
Objectives
This assessment relates to the following subject and program learning objectives:
SLO 1. Apply the regulations that determine accounting and reporting for economic entities.
SLO 4. Discuss, in written form, the appropriate accounting treatment applicable in the given circumstances.
PLO 2.1. Locate and critically evaluate relevant data and literature to address business problems through a research approach. Critically evaluate data and resources in the context of relevant academic literature.
PLO 2.2. Apply critical and creative thinking to address issues in business.
Weighting and marks
20% of the total marks for the subject.
Group size and composition
The assignment is to be completed in groups of five students. All students in a group must be enrolled in the same tutorial class. Group formation is on a voluntary basis and should be completed by Week 5 at the latest.
Assignment Questions
On 8 August 2022, BHP Group Limited (ASX: BHP) proposed to acquire 100 percent of the outstanding shares of OZ Minerals Limited (ASX: OZL). Based on your own research, critically evaluate and analyse the acquisition of OZ Minerals Limited by BHP Group Limited. Your discussion should address but is not limited to the following questions.
What do you think are the economic rationales driving this acquisition for BHP? How did the share price of OZL react to the initial and subsequent acquisition offers by BHP? What can you infer from the price reaction as regards the underlying economic value of OZL?
Discuss the deal structure and your evaluation of the choices made by BHP. These include, but are not limited to, the timing of the deal, acquisition method used, offer price, payment methods (cash or shares), premium, etc.
Did BHP recognize any goodwill or bargain purchase gain arising from the acquisition of OZL? Based on AASB 3, apply the purchase method and prepare an acquisition analysis to find out how much the goodwill is. Do you think the size of the goodwill/bargain is too large or too small? What does this recognized goodwill/bargain tell you about BHPs assessment of the assets and liabilities of OZL? [Hint: Refer to BHPs annual report (June 2023) for information on the FVINA acquired from OZL. You may also refer to the latest annual report (December 2022) of OZL for the carrying amount of assets and liabilities in its balance sheet before the acquisition.]
Like many mining companies, one of the major liabilities of OZL is the Provisions account, relating to its obligations for mine rehabilitation, restoration and dismantling. However, uncertainty exists as to the amount of rehabilitation obligations, which is subject to the changes in many factors. Assume that at the date of acquisition, the carrying amount of Provisions in the books of OZL is $130 million while BHP assessed the Provisions as having a fair value of $380 million. How would BHP account for this difference in value for the Provisions account at the date of acquisition? What if in a subsequent year after the acquisition, the Provisions account is settled by OZL for $150 million? Record all necessary adjusting entries as at the date of acquisition and in the year of the settlement. Include any tax effect entries and provide a logical explanation for each line entry you have provided.
If you are the CEO of BHP, explain to your shareholders how this acquisition is positioned within the groups sustainability strategy. [Hint: Think clean energy and climate change.]
Additional information:
While the assignment is largely practical in nature, assignments gaining higher marks will need to refer to academic literature to support arguments, in addition to internet and practitioner-based literature. These can be located through search engines (e.g., Google Scholar) and the UTS library website. You are only to use publicly available information in order to complete this assignment. For example, the internet, annual reports, company announcements, newspaper, journal articles, databases, and books.
One important source of information for this assignment is the DatAnalysis Premium database available via the UTS Library website. You can obtain all the corporate announcements made by the acquirer, acquiree, or both, their scheme booklet and annual reports, together with their historical stock prices. Just visit the UTS Library website and search for DatAnalysis Premium database to gain access. Once you are in the database, you can key in the ASX ticker of either company in the search box to access company-specific information.
Academic integrity
Academic integrity is of utmost importance at UTS. For a guide to practicing academic integrity, visit the page on Canvas using the link here.
Students may use GenAI in this group assignment. However, it is important to ensure that your assessments are your own original work. In other words, any GenAI content must be correctly acknowledged and referenced. Failure to do that will result in academic misconduct.
There are some key considerations to keep in mind before using GenAI:
Currency and accuracy.GenAI can produce content that seems realistic and factual; however, the information can benon-factual, inaccurate, outdatedand sometimesfalse. It is important to use your critical thinking skills to evaluate and fact-check all content from GenAI.
Academic integrity. You need toacknowledgewhen you have used information fromother sourcesin your work. This includes content from GenAI tools.
Bias and quality.Sometimes content generated by GenAI is generic in nature (as well as potentially false) which may impact the quality of your work. GenAI can also be subject tobiasesorcommercial agendas, which means you don't get the full perspective on a topic.
Formatting and final submission instructions
Cover sheet and original authorship statement
Each report must be accompanied by a completed cover sheet, including the original authorship statement, signed by all team members (see end of this document).
Your assessment submission will be processed through Turnitin. Where the teaching staff have concerns about whether you have completed your own work (for example, your document has low editing time, a low version number or does not appear to be prepared by you for any other reason), you may be asked to provide documentation showing the drafting process you have undertaken in reaching your final submission. This process is similar to real-world accounting, where documents showing the preparation of the financial statements, accounting advice to clients, tax advice or the audit report/opinion are commonly referred to as 'working papers' and must be provided to regulatory bodies on request. For students, your working papers for this assignment can include notes, drafts, access to cloud-stored documents in services such as Google Drive or OneDrive, or internet search history related to the assessment task. It is recommended that you retain these notes, drafts, etc. for at least four months after the end of the teaching session (businesses and accountants in Australia are required to keep their working papers for seven years). Failure to be able to provide such material on request from your coordinator, Academic Integrity Officer or Responsible Academic Officer of the university may be used in misconduct allegations against you. Any request will be made to you in writing to your UTS email address.
Dispute
This group assignment is an opportunity for students to work as a team. Good team work involves effective communication among group members, allocation of tasks and meeting deadlines. To facilitate a good outcome, every group should elect a team leader in their first meeting and discuss issues and set policies (see details on page 6 of this document) regarding how to proceed with the assignment. Any disputes among members should be worked out, in the first instance, within the group. If the issues cannot be resolved internally, let your tutor know as soon as practicable for assistance. After submission, students who still have concerns over unfair contribution by individual members can fill out a peer review form on Canvas.
Report structure
The assignment is to be written as a professional consulting report. The report must follow the formatting requirements outlined in the UTS Guide to Writing Assignments. The writing guide can be downloaded here:
https://www.uts.edu.au/sites/default/files/2020-02/UTS%20Business%20writing%20guide%202020.pdfPage limits
The report should have a maximum length of 15 pages. The structure and relevant page limits of the final report are as follows:
Signed cover sheet (not included in page limit)
Table of contents (not included in page limit)
Executive summary (max. 150 words)this summarizes what the report found (past tense) and conclusions. This is different from an essay introduction, which introduces what the report will cover (future tense).
Introductionintroduces the companies, industry and the context of the report
Main bodyincludes main text, diagrams, figures and tables, etc., for the five main questions
Conclusions (max. 200 words)
Reference list (not included in page limit)
Appendices (not included in page limit)
Formatting of text
Font: Times New Roman, 12pt
Line spacing: double line-spacing
Margins: At least 2.54cm for top, bottom, left and right margins
Referencing
All sources of information must be referenced in the report using the APA referencing style. Details on this style can be found in the writing guide. Further information can be found here:
https://www.lib.uts.edu.au/referencing/apaFor a guide and example on how to reference GenAI in APA (7th) format, visit the Canvas page here.
Any source referenced in-text must be listed in the reference list at the end of the report. Any report that contravenes the referencing policy may draw severe penalties and be referred to the student misconduct committee.
Assignment submission dates
Group registrationstudents to register online in their respective tutorial channel on MS Teams and complete the Group Registration Form (see end of this document) before emailing to their tutor.
Final assignmentto be submitted through Turnitin by 9:00am Thursday 26 October 2023. Late submissions will incur a 10% penalty of the assignment mark per day.
Turnitin: The assignment is to be submitted through Turnitin (a plagiarism detection software). This is accessible on Canvas under the Assessments module (Assessment Task 2). Failure to submit through Turnitin will result in a zero mark being awarded.
Naming your assignment file: Name your assignment file starting with your tutorial number and your group name (to be chosen by your group). For example, if you are enrolled in Tutorial 02 and your group name is ABC, then name your assignment file as follows: T02_ABC
No hard copies are required.
You can only submit your assignment to Turnitin ONCE.
Submission timetable:
What Where When Feedback
Group registration Group registration form (pp. 5-6 of this document) Email to your tutor Week 6 Final submission (online) Complete final report (with cover sheet) Canvas under the Assessments module By 9:00 am, Thursday, 26 Oct 2023 Turnitin report; completed marking rubric; report grade
Late penalties:
Groups that do not conform to the submission timeline will incur the following penalties:
Final submission onlinea penalty of 10% of the mark for every day late, applied to the assignment mark of 20. For example, if you submit your final report at 9:01 am on the due date, the group will receive a 2-mark reduction from the overall mark given for the assignment. The submission time is the time Turnitin records once the document has been uploaded. During peak assessment periods, uploading may take a while to process. Students are, therefore, advised to submit their assignment well in advance of the time due.
22320 Group Assignment
Group REGISTRATION FORM
GROUP MEMBER DETAILS
It is the responsibility of each member of the group to collect at least 2 different forms of communication from each group member. This may include phone numbers, UTS email addresses, or other forms of communication the group agrees to set up and use.
STUDENT ID FAMILY NAME FIRST NAME(S) 2 CONTACT DETAILS SHARED (Specify method)
1 2 3 4 5 Tutor name: Tutorial number: Tutor email: Assigned companies: BHP and OZ Minerals
Person to submit assignment to Turnitin PROJECT PLAN:
Task/Component Activities Start date Finish date Responsible group member(s)
OUR GROUP POLICIES:
Outside class, how will we communicate with each other?
How often will we communicate and how long is it reasonable to expect a reply?
When will we attempt to meet? (E.g., what time, how often?)
Where will our meetings take place? (E.g., virtual meeting online in Teams)
When is it OK to miss a meeting?
How do we deal with members who are late or miss a meeting?
How do we deal with members who dont participate enough, participate too much or distract the group from its task?
What will we do if a group members work doesnt meet our standards?
Other policies:
We agree to this plan and policies and will try our best to uphold them:
Student ID Number Student Name Signature
22320 Accounting for Business Combinations
Group Assignment Cover Sheet
SPRING 2023
Tutor name: Tutorial number: Group name: Date submitted: Assigned companies: Original Authorship Statement
We hereby certify that this assignment is our own work, based on our personal study and research and that we have acknowledged all material and sources used in the preparation of this assignment. We also certify that the assignment has not previously been submitted for assessment and that we have not copied in part or whole or otherwise plagiarised the work of other students or authors:
Student ID Student Name Signature Date
SUBMISSION CHECKLIST (please read, tick and sign)
Final report structure and content
Cover sheet
Table of contents
Executive summary
Short introduction paragraph
Headings used throughout the report
Main conclusions
Reference list and appendices
Large blocks of text have been broken up into paragraphs, with one key idea per paragraph
All statements of fact have been referenced
Minimal use of direct quotes ideas should be paraphrased in your own words
Format
Times New Roman font 12-point
Line spacing double
Margins: at least 2.54 cm for top, bottom, left and right margins
Referencing
Number of academic journal articles in reference list___
Number of other sources in reference list____
All direct quotes have page numbers in their in-text reference
All references in text have been included in the final reference list
Final reference list is in alphabetical order by author
Turnitin
Report has been checked by all group members before submissiononly one submission allowed
Name of student who submitted the report to Turnitin _______________________
22320 Group Assignment: Marks and Feedback Student ID, First name LAST NAME
Student ID, First name LAST NAME
Student ID, First name LAST NAME
Student ID, First name LAST NAME
Student ID, First name LAST NAME Marks
Class time and tutor: Tutors Name, Tutorial Number, Class Time /20
%
Marking item Exceeds criteria (Distinction/HD = 75%100%) Meets criteria (Pass/Credit = 50%74%) Criteria not yet met (Fail = 0%49%)
Question 1 Provides detailed analysis of the rationales behind the business combination. The reasons provided are convincing and supported by evidence.
Evaluates critically how the share price of the acquiree reacted to the takeover announcements by the bidder in comparison to the overall market performance in days around those announcements.
Provides clear inference, with explanation supported by academic literature, on how the price reaction would reflect the underlying economic value of the acquiree. Provides a clear analysis of the rationales behind the business combination.
Describes the acquirees share price reactions to the takeover announcements by the bidder.
Provides valid inference and explanation on how the price reaction would reflect the underlying economic value of the acquiree. Does not provide adequate analysis of the rationales behind the business combination.
Does not provide adequate evaluation of the acquirees share price reactions to the takeover announcements by the bidder.
Does not provide valid inference and explanation on how the price reaction would reflect the underlying economic value of the acquiree.
Question 2 Provides a clear, comprehensive, succinct overview of the deal structure and acquisition method chosen. Convincingly justifies why the acquisition method was used with supported evidence.
Correctly identifies the offer price and any subsequent changes. Justifies the offer price through comparison with similar acquisitions. Discusses the impact of choosing cash only, shares only or a combination of both on the financials of the acquiring firm with convincing evidence.
Provides a clear overview of the takeover premium and provides clear reasons behind the payment of a premium. What determines premium can be found by reading academic journal articles (valid source). Provides a clear overview of the deal structure and acquisition method. Provides a valid explanation of why the acquisition method was used.
Correctly identifies the offer price and any subsequent changes. Discusses the offer type in terms of cash only, shares only or a combination of both and attempts to provide some explanations for the choice made.
Provides a clear overview of the takeover premium and provides some reasons behind the payment of a premium but does not fully identify the relevant academic literature on the issue.
Does not provide a clear overview of the deal structure and acquisition method. Does not provide a valid explanation of why the acquisition method was used.
Does not correctly identify the offer price and any subsequent changes. Limited discussion of the offer type in terms of cash only, shares only or a combination of both.
Incorrectly calculates the takeover premium. Some explanation of the takeover premium is provided with or without reference to a valid source.
Question 3 Correctly identifies the goodwill/bargain purchase arising from the acquisition.
Provides a clear acquisition analysis with details supported by the relevant information from the proforma or post-acquisition annual report.
Provides clear justification or otherwise of the size of the goodwill arising from the acquisition. Correctly identifies the goodwill/bargain purchase arising from the acquisition.
Provides an adequate acquisition analysis.
Partially valid justification of the goodwill arising from the transaction Incorrectly identifies the goodwill/bargain purchase arising from the acquisition.
Provides an inadequate acquisition analysis.
Invalid justification of the goodwill arising from the transaction.
Question 4 Explains clearly the correct accounting method for fair value adjustments of liabilities at the date of acquisition and subsequent consolidation adjustments in the year of settlement.
Correctly records all adjusting and tax effect entries required.
Provides logical explanation for each line entry recorded and their impact on the consolidated financial statements. Explains adequately the correct accounting method for fair value adjustments of liabilities at the date of acquisition and subsequent consolidation adjustments in the year of settlement.
Correctly records most of the adjusting and tax effect entries required.
Adequately explains each line entry recorded and their impact on the consolidated financial statements. Does not explain the correct accounting method for fair value adjustments of liabilities at the date of acquisition and subsequent consolidation adjustments in the year of settlement.
Does not provide valid adjusting and tax effect entries required.
Does not provide logical explanation for each line entry recorded and their impact on the consolidated financial statements.
Question 5 Provides persuasive, insightful and critical opinion, supported by extensive evidence on how the takeover adds to the sustainability strategy of the group.
Demonstrates the ability to determine how the information gathered from the sustainability report (or other sources) of the subsidiary complements the information in the sustainability report of the parent. Provides some valid opinion supported by some evidence on how the takeover adds to the sustainability strategy.
Does not provide valid explanations on whether the takeover adds to the groups sustainability strategy or opinion is not supported by appropriate evidence.
Use of references
Demonstrates deep engagement with relevant accounting standards (if any) and academic sources in developing discussion and providing evidence throughout the report. Uses relevant accounting standards (if any) and academic sources to support main points of discussion through some parts of the report. Does not refer to relevant accounting standards (if any) and academic sources or only engage with them superficially.
Written communication Communication is clear, concise and precise, with all sections integrated into a coherent report. Report is very well written, structured, and presented in a professional and coherent manner. Excellent use of visual material that is well integrated with text. Minimal grammar/spelling/punctuation errors. The formatting, referencing and maximum page limit is strictly adhered to.
Communication is generally clear and concise, with some integration between the report sections. Report is well written, structured, and presented in a professional and coherent manner. Good use of visual material to support text. Some grammar/spelling/ punctuation errors. The formatting, referencing and maximum page limit is mostly adhered to (up to 1 page over max page limit). Communication of report is unclear, making it difficult for the reader to understand the ideas being presented. This may be the result of imprecise language, confusing use of diagrams or poor structure. Minimal integration between sections. Presentation may appear unprofessional or unfinished. Many grammar/spelling/ punctuation errors. The formatting, referencing or maximum page limit is not adhered to (more than 1 page over max page limit).
Additional comments:
