BA and Iberia to merge. Except not.

, ,

British Airways is a big airline and so is Iberia; the flag carrier airline of Spain.  Both have experienced considerable difficulties in recent years with the global recession greatly reducing revenues and causing operating losses.

For nearly two years, the two airlines were in discussions about merger, in order to share routes and operating fixed costs.  The deal was finally announced in mid November 2009.

The deal is that the two airlines will fuse to create a new business with the working name of Topco. Topco’s capital will be 55% owned by BA’s shareholders and 45% by Iberia’s shareholders. The board will meet in Spain and the CEO of BA will become the CEO of the new business.

For accounting purposes, mergers don’t exist. There is always an acquirer and an acquiree; respectively being the controlling party and the controlled. In this situation, we accountants see it that BA has just done a deal to acquire a new subsidiary, called Iberia.  Assuming that Iberia’s shareholders agree to sell.  And before that happens, there’s the minor issue of BA’s huge deficit on its defined benefit pension scheme to sort out. IAS 19 produces some deeply unattractive pension liabilities on BA’s statement of financial position.

An unexpected ending...

A lot of you may have been on business trips but I bet your trip wasn't as exciting (and tragic) as this gentlemen's trip was.[..]

Is the joke on Volkswagen?

The German carmaker Volkswagen said “we regret if it appeared to some that we overshot the mark of this campaign.” The campaign involved announcing that[..]

Diversity champion leaves...

If you are the diversity champion of an organisation with approximately 20,000 employees it’s probably best if you’re not bullying staff. Deloitte’s (now ex) deputy[..]

Enjoy the freeze...

Working from home has become a fact of life for a lot of people due to the Covid-19 pandemic. Synonymous with working from home are[..]