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Fourth edition of A guide to accounting for business combinations


We have published the fourth edition of A guide to accounting for business combinations, our comprehensive publication designed to assist middle market companies in their application of the guidance in Topic 805, “Business Combinations,” of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). This edition reflects numerous changes made to the accounting for business combinations by the FASB, and addresses many additional practice issues. The following list highlights some of the more significant topics added to, expanded upon or otherwise updated in the fourth edition of our business combinations guide:   

  • Accounting for combinations or transfers between entities under common control
  • Determining whether what was acquired meets the definition of a business
  • Accounting for acquired accounts and loans receivable and investments in debt securities within the scope of ASC 326, “Financial Instruments—Credit Losses” 
  • Accounting for acquired customer contracts within the scope of ASC 606, “Revenue from Contracts with Customers” 
  • Performing reasonableness checks when a customer relationship intangible asset’s fair value was determined using a projected cash flow approach and the buyer is considering use of the straight-line amortization method for that asset 
  • Determining the fair value of inventory
  • Accounting for acquired leases within the scope of ASC 842, “Leases”
  • Determining the fair value of a noncontrolling interest
  • Accounting for when the buyer pays off the seller’s debt in connection with a business combination
  • Accounting for consideration transferred held in escrow
  • Measuring the fair value of seller-financed debt
  • Recognizing and measuring the fair value of rollover equity
  • Accounting by the seller for contingent consideration
  • Accounting for payments to selling shareholders retained as employees when those payments are contingent upon future employment
  • Accounting for asset acquisitions
  • Accounting for increases or decreases in the buyer’s controlling ownership interest 

For changes made by the FASB to existing guidance for which there are significantly deferred effective dates (e.g., ASC 326 and 842), discussion is provided on both the preexisting guidance and the changed guidance.   

A complete list of all the topics covered and examples and checklists provided in our business combinations guide is included in the table of contents.

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