Many acquisitions require a restructuring of operations to integrate the acquired entity into the acquiring company's business structure.

Required

a. What actions does a company typically take in restructuring the organization following an acquisition? What are the advantages of restructuring operations?

b. Assume a company plans to shut down three factories, lay off 5,000 workers, and eliminate one line of business of an acquired company. How does the company compute the cost for disposing of the line of business? What information needs to be gathered to audit the restructuring reserve?

c. Explain how WorldCom used restructuring reserves (liabilities) to manipulate reported earnings.

d. Assume that the company had more than a plan; it had specifically identified parties that would be affected by the restructuring. Therefore, the company accrued a restructuring reserve and recognized the expense as an unusual expense below operating income. What should be the proper accounting for future costs associated with the restructuring?

e. How does a company decide that a restructuring plan is complete? What is the proper accounting for a restructuring reserve that remains on the books, but for which the restructuring has been completed?