An aggressive CEO may order the company controller to include a number of acquisitions in the following year's budget. If the controller complies, the budget will almost certainly be laughably distant from reality. It is extremely difficult to convince a potential acquiree to agree to be bought on the exact date specified in the budget, and especially to be bought for the budgeted amount. In reality, an acquisition-minded company will monitor a large number of potential acquirees all the time, and buy only those that bubble up to the top of the acquisition "heap." The financial characteristics of the companies actually acquired may differ substantially from the companies included in the annual budget - they may have markedly different revenues, margins, and purchase prices.
Thus, the controller who agrees to include acquisitions in the annual budget is doomed to issue a remarkably inaccurate budget. Unfortunately, a persistent (and misguided) CEO may insist on including acquisitions in the budget, and on using very specific amounts for those acquisitions. What is the controller to do?
The solution is to maintain an acquisition-inclusive budget for the CEO, and an acquisition-less budget for everyday use. When loading the budget into the accounting software in order to obtain budget-versus-actual financial statements, only include the information from the acquisition-less budget. This yields comparative financial statements that have some basis in reality.
If and when an acquisition does occur, have the acquiree create a monthly budget for the remainder of the year, and load that information into the accounting software as an addition to the existing budget. Do not under any circumstances load in the original budget numbers from the acquisition-inclusive budget, since it is highly unlikely that they will even remotely resemble the results of the acquiree.
By taking this approach, the CEO gets the budget that he specified, while the controller obtains a budget that should correlate well to subsequent events.