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Business Combinations & Consolidation

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Business Combinations – FASB Discusses Intangible Assets in a Business Combination NEW!

FASB Accounting Standards Updates - Accounting Standards Update No. 2021-08 —Business Combinations (Topic 805) —Accounting for Contract Assets and Contract Liabilities from Contracts with Customers 

FASB Discusses Business Combinations and Asset Purchases 

Business Combinations (Topic 805): Clarifying the Definition of a Business - FASB ASU 2017-01 

FASB Accounting Standards Update No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business 

Podcast: Audit Partner Steven Vertucci Discusses the Newest FASB Accounting Standards Update: Clarifying the Definition of a Business 

FASB Accounting Standards Update No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business

FASB Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business

FASB Proposed Accounting Standards Update 2016-260 - Consolidation (Topic 810): Interests Held Through Related Parties that are Under Common Control FASB4

FASB Accounting Standards Update No. 2015-08, Business Combinations (Topic 805): Pushdown Accounting

FASB Accounting Standards Update No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments 

Articles

Business Combinations – SEC Staff Updates Compliance and Disclosure Interpretations

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has updated the following Compliance and Disclosure Interpretations (C&DIs):

  • Exchange Act Form 8-K (Question 102.04-102.05);
  • Proxy Rules and Schedules 14A/14C (101.02, 132.01-132.02); and
  • Tender Offers and Schedules (166.01).

Corp Fin has updated these C&DIs to provide additional guidance on disclosures associated with entering into a business combination agreement. This updated guidance includes discussion of when a company must disclose material terms and conditions when entering into a business combination agreement that is reportable under Item 1.01 of Form 8-K. The updated guidance also discusses certain proxy disclosure rules related to whether public communications represent solicitations subject to such rules. Finally, the updated guidance discusses Corp Fin’s views on whether SEC Rule 14e-5 on the prohibition of purchases outside of a tender offer applies to transactions involving Special Purpose Acquisition Companies. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Business Combinations – FASB Discusses Intangible Assets in a Business Combination

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on March 2, 2022, and discussed: (1) the accounting for identifiable intangible assets in a business combination; and (2) the goodwill balances that should be included in the scope of the subsequent accounting guidance for goodwill. The latter included goodwill arising from a reorganization, goodwill at a subsidiary (including from applying pushdown accounting), and goodwill arising from applying the equity method of accounting. The FASB provided its leaning to require that an entity subsume contractual and noncontractual customer relationships into goodwill if they are not separable.

The FASB also provided its leaning to include reorganization goodwill, goodwill at a subsidiary, and equity method goodwill in the scope of subsequent accounting guidance for goodwill and to provide additional implementation guidance for entities applying pushdown accounting. No decisions were made. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates - Accounting Standards Update No. 2021-08 —Business Combinations (Topic 805) —Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

Summary - The FASB issued Accounting Standards Update (ASU) No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, that addresses diversity in practice related to the accounting for revenue contracts with customers acquired in a business combination.

Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Topic 606, Revenue from Contracts with Customers, at fair value on the acquisition date.

The FASB indicates that some stakeholders indicated that it is unclear how an acquirer should evaluate whether to recognize a contract liability from a revenue contract with a customer acquired in a business combination after Topic 606 is adopted. Furthermore, it was identified that under current practice, the timing of payment (payment terms) of a revenue contract may subsequently affect the post-acquisition revenue recognized by the acquirer. To address this, the ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.

Finally, the amendments in the ASU improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Discusses Business Combinations and Asset Purchases

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on May 9, 2018, and discussed how certain areas within the accounting for asset acquisitions and business combinations could be aligned, specifically contingent consideration, in-process research and development, and acquisition costs. No technical decisions were made.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 

Business Combinations (Topic 805): Clarifying the Definition of a Business - FASB ASU 2017-01

Summary - These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.
 
The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.
 
Effective - Effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted under certain circumstances. The amendments should  be applied prospectively as of the beginning of the period of adoption.
 
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 

FASB Accounting Standards Update No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business

Summary - These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.
 
The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.
 
Effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted under certain circumstances. The amendments should be applied prospectively as of the beginning of the period of adoption.
 
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 

Podcast: Audit Partner Steven Vertucci Discusses the Newest FASB Accounting Standards Update: Clarifying the Definition of a Business

Summary - Our May 2017 podcast features Steven Vertucci, Audit Partner, as he discusses one of the FASB updates featured in the May 2017 newsletter, Topic 805, which pertains clarifying the definition of a business. Steven also provides information on who this update affects and when it will go into effect. 

 

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Update No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business

Summary - We have added a GAAP Update Service that discusses ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this ASU affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.

The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

For public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, clarifying the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.

The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

For public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Proposed Accounting Standards Update 2016-260 - Consolidation (Topic 810): Interests Held Through Related Parties that are Under Common Control FASB4

Summary -   The FASB has issued a proposed ASU,  Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control.  Comments are due by July 25, 2016. The proposed amendments would affect reporting entities that are required to evaluate whether they should consolidate a variable interest entity, in certain situations involving entities under common control. Specifically, the proposed amendments would change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity would treat indirect interests in the entity held through related parties that are under common control with the reporting entity.
 
The proposed amendments would not change the characteristics of a primary beneficiary. A primary beneficiary of a variable interest entity has both of the following characteristics: (1) the power to direct the activities of a variable interest entity that most significantly impact the variable interest entity's economic performance; and (2) the obligation to absorb losses of the variable interest entity that could potentially be significant to the variable interest entity or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity.
 
If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the proposed amendments would require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. That is, under the proposed amendments, a single decision maker would no longer be required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety and, instead, would include such interests on a proportionate basis consistent with indirect interests held through other related parties.
 
If, after performing that assessment, a reporting entity that is the single decision maker of a variable interest entity concludes it does not have the characteristics of a primary beneficiary, the proposed amendments would continue to require that reporting entity to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary. If the single decision maker and its related parties that are under common control, as a group, have the characteristics of a primary beneficiary, then the party within the related party group that is most closely associated with the variable interest entity is the primary beneficiary.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
 

FASB Accounting Standards Update No. 2015-08, Business Combinations (Topic 805): Pushdown Accounting

Summary -  The FASB has issued ASU No. 2015-08, Business Combinations (Topic 805): Pushdown Accounting-Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115. This ASU amends various SEC paragraphs of the FASB Accounting Standards CodificationTM pursuant to the issuance of SEC Staff Accounting Bulletin No. 115.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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FASB Accounting Standards Update No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments 

Summary - Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments eliminate the requirement to retrospectively account for those adjustments.

U.S. GAAP currently requires that during the measurement period, the acquirer retrospectively adjust the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. The acquirer also must revise comparative information for prior periods presented in financial statements as needed, including revising depreciation, amortization, or other income effects as a result of changes made to provisional amounts.
 
The amendments require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.
 
The amendments require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.
 
For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued.
 
The only disclosures required at transition should be the nature of and reason for the change in accounting principle. An entity should disclose that information in the first annual period of adoption and in the interim periods within the first annual period if there is a measurement-period adjustment during the first annual period in which the changes are effective.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
 
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