Ernst & Young (EY) proposed a split, which had been in the works and widely...
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Ernst & Young (EY) proposed a split, which had been in the works and widely discussed internally for months. The reason was to help avoid conflicts of interest that can arise between the auditing work and consulting work that EY does for some corporate clients. This plan fell through and cost an estimated $600 million dollars. The question is how do they account for the loss? The rule for publicly traded companies is it can be capitalized if the split is successful.
1. EY is a private partnership so can the cost be capitalized and written off over time? Please explain why or why not.
2. What would you recommend and why
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