FASB proposes guidance on business combinations

October 31, 2024

FASB published a proposed Accounting Standards Update (ASU) that is intended to improve the requirements for identifying the accounting acquirer in FASB ASC Topic 805, Business Combinations.

The ASU is based on a recommendation of FASB's Emerging Issues Task Force.

The proposed ASU is intended to establish more consistent requirements for determining the accounting acquirer when a business is acquired in a transaction achieved by exchanging equity interests, FASB said in a news release.

In a business combination, according to the release, the determination of the accounting acquirer can affect the carrying amounts of the combined entity's assets and liabilities, which can affect the combined entity's post-transaction net income.

The ASU would more closely align the requirements for determining the accounting acquirer in the acquisition of a variable-interest entity (VIE) with the current requirements that apply to transactions that do not involve a VIE.

The proposal is expected to enhance financial statement comparability by providing consistent requirements for economically similar transactions.

Public comments on the proposed ASU should be submitted by Dec. 16, 2024.

[Journal of Accountancy]