For an accountant not used to dealing with acquisitions, the accounting policies are simply the ones set out in the annual financial statements. However, companies may have many more accounting policies that are not disclosed in the annual accounts.

Some of these are not immediately obvious, for example, recognition of holiday pay provisions.

A vendor preparing accounts for a 31 December year-end that coincides with his workers’ holiday year-end will never have a holiday pay provision. However, should he sell on 31 March he may find a vendor seeks to insert a holiday pay provision into the completion accounts.

If the accountant has not inputted into the SPA, both sides may find that the SPA and the annual account’s accounting policies are silent on the issue. At this point, the purchaser may argue that GAAP should be applied and conversely the vendor that consistency should apply, resulting in a costly argument that could have been avoided if the accountant had raised the issue while the SPA was being drafted.

Winghaven Partners, a London-based specialist M&A adviser and a client of Alliotts, understands the need for care on completion accounts requirements. Chairman Will Iselin says: “We have done many deals with Alliotts, as advisers and as purchasers of assets, and have used their input in the SPA. Issues, such as deferred tax, debtor retentions/escrow policies and holiday pay accruals have all been relevant on deals, and we’ve been pleased to see specific terms set out in the SPA that remove unnecessary negotiation over such issues that are usually afterthoughts.”