ACQUISITION ADJUSTMENT Meaning and
Definition
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Acquisition adjustment refers to a financial or accounting term that describes the process of making changes or modifications to the financial statements of a company after it has acquired another business or entity. When a company acquires another company, it is required to consolidate the financial statements of both entities into one set of financial statements. This is done to provide a comprehensive view of the combined performance and financial position of the newly formed entity.
Acquisition adjustments are made to ensure that the financial statements reflect the true and fair value of the acquired business and its assets and liabilities. These adjustments are necessary because the acquired company may have different accounting policies, valuation methods, or recognition criteria, which might not comply with the standards or practices followed by the acquiring company.
Common acquisition adjustments can include aligning accounting policies, revaluating assets and liabilities, adjusting deferred tax liabilities or assets, recognizing intangible assets, or revising provisions for contingent liabilities. These adjustments are made to present a more accurate and comparable financial picture of the newly formed entity, enhancing transparency and aiding stakeholders in making informed decisions.
Acquisition adjustments are usually carried out by financial professionals, accountants, and auditors, who analyze the financial statements and data to identify and apply the necessary adjustments. It is crucial for companies to properly document and disclose these adjustments, ensuring compliance with accounting standards and regulations to maintain transparency and integrity in financial reporting.
Etymology of ACQUISITION ADJUSTMENT
The word "acquisition" has its roots in the Latin word "acquisitio", which is derived from the verb "acquirere", meaning "to gain or obtain". It entered the English language in the late 15th century.
The word "adjustment" comes from the Middle French word "ajustement", which is derived from the verb "ajuster", meaning "to adjust or adapt". The verb "ajuster" had its origins in the Latin word "adiustare", which meant "to correct or align". "Adjustment" entered the English language in the early 17th century.
Therefore, the etymology of the term "acquisition adjustment" can be understood from the individual roots of the words "acquisition" and "adjustment", both originating from Latin and French languages.
