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Section 9100: Business Combinations
[U.S. GAAP Codification Topic]
805 Business combinations
805-10 Overall
805-20 Identifiable assets and liabilities and any noncontrolling interest
805-30 Goodwill or gain from bargain purchase, including consideration transferred
805-40 Reverse acquisitions
805-50 Related issues
805-740 Income taxes
[U.S. GAAP before the Codification]
SFAS 141, June 2001, Business Combinations
SFAS 141(R), December 2007, Business Combinations, Revised SFAS 141
FSP FAS 141(R)-1, April 2009, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies
1. Acquisition method is applied for business combinations.
2. Steps of acquisition method:
(1) Acquirer
(2) Acquisition date
(3)Assets, liabilities, noncontrolling interest
(4) Goodwill
3. One entity should be identified as the acuquirer.
4. The acquirer obtains control at the acquisition date.
5. Recognition principle
The following are recognized at the acquisition date:
(1) Assets
(2) Liabilities
(3) Noncontrolling interest
(4) Goodwill
6. Measurement principle
The following are measured at the acquisition-date fair values:
(1) Assets
(2) Liabilities
(3) Noncontrolling interest
7. Exceptions to Recognition and Measurement Principles
(1) Assets and liabilities arising from contingencies
(2) Income taxes
(3) Employee benefits
(4) Indemnification assets
8. Exceptions to the Measurement Principle
(1) Reacquired assets
(2) Share-based payment awards
(3) Assets held for sale
9. Goodwill or a gain from bargain purchase
(1) Goodwill = Consideration transferred + FV of NCI - FV of Net Assets
(2) Gain from bargain purchase
= FV of Net Assets - Considerations transferred - FV of NCI
FV: Fair Value
NCI: Noncontrolling Interest
10. Consideration transferred
(1) Consideration transferred is measured at fair value
(2) Contingent consideration is measured at the acquisition-date fair value
11. Share-based payment awards exchanged for acquiree's employees
(1) Modification of share-based payment awards under SFAS 123R
12. Business combinations achieved in stages
(1) Previously held equity interest is remeasured at the acquisition-date fair value
(2) Changes in fair value are recognized in earnings as gains or losses
13. Business combinations achieved by contract alone
(1) Business combinations achieved without the transfer of consideration
(2) Rules of acquisition method are applied
--> even if all equity interests are allocated to NCI
14. Acquisition-related costs are recognized as expenses
(1) One exception: issuance costs of debt or equity securities
--> apply related GAAP
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