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Business combinations: Clarifying the definition of a business

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In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, to clarify the definition of a business by adding guidance that helps entities evaluate whether transactions should be accounted for as acquisitions (or disposals) of businesses or assets. Our white paper, Business combinations: Clarifying the definition of a business, provides information about the ASU’s main provisions, effective date and transition, along with some examples. It is expected that the ASU’s guidance will result in fewer transactions being treated as business combinations, particularly in the real estate industry. As a result, entities may wish to early adopt the ASU’s guidance. If early adoption is not elected: (a) public business entities must apply the guidance in the ASU to annual periods beginning after December 15, 2017, including interim periods therein, and (b) all other entities must apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

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