A high volume of consultations by the SEC’s Office of the Chief Accountant in 2022 focused on identifying the acquirer in business combinations for accounting purposes. This area in U.S. GAAP continues to pose ongoing challenges for accounting and financial reporting professionals, who might be forced to file restatements if they apply the guidance incorrectly.
Under FASB ASC 805, Business Combinations, one of the combining entities in a business combination must be identified as the acquiring entity, who is then required to apply the acquisition method of accounting to the transaction. This method requires an acquirer to determine the acquisition date and to recognize and measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, as well as any goodwill or gains derived from a bargain purchase.
Grant Thornton’s Viewpoint, complete with FASB citations as well as insights and examples developed by our Accounting Principles Group, is designed to help practitioners navigate this challenging topic. This publication discusses how to identify the acquirer only in those business combinations that fall within the scope of ASC 805-10; it does not apply to transactions or events within the scope of ASC 805-50, which has its own discrete scope covering asset acquisitions, transactions between entities under common control, the formation of master limited partnerships, and pushdown accounting.
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