Under the guidance in ASC 805, an entity applies the acquisition method of accounting when it acquires a business or a not-for-profit activity. The acquisition method of accounting requires an entity to (a) identify the acquirer; (b) determine the acquisition date; and (c) recognize and measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, as well as goodwill or gains arising from a bargain purchase.
Our Viewpoint, Identifying business combinations, discusses how to determine whether a transaction or event that yields control of net assets to an acquiring entity should be accounted for as a business combination. The discussion ranges from the definition of a “business combination”; what constitutes “control” over an acquiree; and how to apply the “screen test” and “framework” to determine whether an acquisition comprises a business.
Complete with original examples, insights, and flowcharts developed by Grant Thornton professionals, our Viewpoint also includes examples and guidance cited directly from the FASB’s Accounting Standards Codification.
Download our Viewpoint here.