FASB Issues Standard That Clarifies Guidance for Identifying the Accounting Acquirer in a Business Combination

The Financial Accounting Standards Board (FASB) today published an Accounting Standards Update (ASU) that improves the requirements for identifying the accounting acquirer in FASB Accounting Standards Codification® Topic 805, Business Combinations. The ASU is based on a recommendation of the Emerging Issues Task Force (EITF).

“The new ASU is the first recommendation from the recently reconstituted EITF to be issued as a final standard, and we thank the group for providing a path forward in making financial reporting in this area more comparable and decision useful for investors,” stated FASB Chair Richard R. Jones.

In a business combination, the determination of the accounting acquirer can significantly affect the carrying amounts of the combined entity’s assets and liabilities.

The ASU will revise current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity that meets the definition of a business. The amendments require an entity to consider the same factors that are currently required for determining which entity is the accounting acquirer in other acquisition transactions.

The ASU, including effective date information, is available at www.fasb.org.