Author: Joseph Nacmias (CPA)
McGladrey & Pullen, LLP., Certified Public Accountants
750 3rd Avenue, New York, NY 10017
Telephone: (212) 297-4888 / Fax: (212) 972-9088
E-Mail: Joseph_Nacmias@rsmi.com
/ http://www.mcgladrey.com
A purchase of a privately held company involves adjusting the target’s financial results for distortive items such as excessively high salaries, benefits and other expenses. All insider transactions must be carefully ascertained and their effect on operating income calculated; tax-saving motives can transform salaries into rents (or vice-versa), can increase auto expenses and can even create a variety of unsubstantiated (non-business) costs, assets, etc. In certain situations, reported income may not be complete and this would require purchaser assessment of the levels of underreporting as well as the systemic weaknesses that permit it.
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DISCLAIMER The information provided here and on the other pages linked hereto is intended for educational purposes only, and is not legal advice. Particular situations require particular analyses that can only be provided by legal and/or accounting professionals who specialize in the relevant fields and who know all the details of a situation. Also, a presentation such as this does not establish the attorney and/or CPA-client relationship that is necessary in any rendering of legal or other professional advice. Finally, one should be aware that the law is a chameleon-like beast that changes its colors frequently, and what holds good today may be reversed by tomorrow. The comments herein should then be read in that light. |
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