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Nokia Siemens Networks: Purchase Accounting, Equity Method, and Proportionate Consolidation

In: Financial Analysis of Mergers and Acquisitions

Author

Listed:
  • Eli Amir

    (Tel Aviv University)

  • Marco Ghitti

    (SKEMA Business School)

Abstract

During June, 2006, Nokia and Siemens announced the merger of their network business operations. The newly created entity was called Nokia Siemens Networks (“NSN”) and was ranked among the top three industry leaders in the telecom vendor sector. Prior to the transaction, Nokia and Siemens each owned 100% of their respective subsidiaries and, as part of the transaction, each entity relinquished control of its respective subsidiary for a 50% stake in NSN. In this case, we analyze the accounting implications of this transaction for both Nokia and Siemens. In particular, we analyze the transaction using three different methods for inter-corporate investments: equity method, proportionate consolidation, and full consolidation under the purchase method. Using common ratios, we examine which method would be preferred by the transacting companies.

Suggested Citation

  • Eli Amir & Marco Ghitti, 2020. "Nokia Siemens Networks: Purchase Accounting, Equity Method, and Proportionate Consolidation," Springer Books, in: Financial Analysis of Mergers and Acquisitions, chapter 0, pages 225-238, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-61769-1_13
    DOI: 10.1007/978-3-030-61769-1_13
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