Wiley GAAP: Practical Implementation Guide and Workbook

Chapter 15. BUSINESS COMBINATIONS (ASC 805)

BACKGROUND AND INTRODUCTION

The U.S. generally accepted accounting standards (GAAP) assume that an acquirer can be determined and identified in nearly all business combinations. ASC 805 applies to all business combinations except joint venture operations, the acquisition of an asset or a group of assets that does not constitute a business, combinations of entities under common control, and combinations between not-for-profit entities (NFPs) or the acquisition of a for-profit business by an NFP.

DEFINITIONS OF KEY TERMS

Acquiree. One or more businesses in which an acquirer obtains control in a business combination.

Acquirer. An entity that obtains control over one or more businesses in a business combination. When the acquiree is a variable interest entity (VIE), the primary beneficiary of the VIE is always the acquirer.

Acquisition date. The date on which control of the acquiree is obtained by the acquirer.

Acquisition method. The required method of accounting for business combinations where the acquisition date occurs during fiscal years ending on or after December 31, 2009. The application of the acquisition method will normally result in substantive differences in the types of assets and liabilities recognized by the acquirer as well as the measurements of the amounts recognized for those items in the consolidated financial statements of the acquirer.

Acquisition-related costs. Expenses incurred by an acquirer to enter into a business combination. ...