The proposal is meant to improve requirements for identifying the accounting acquirer in FASB Accounting Standards Codification Topic 805, Business Combinations. The proposed ASU is based on the recommendation of the Emerging Issues Task Force. Comments on the proposed ASU are due by Dec.16, 2024.
In a business combination, the determination of the accounting acquirer can significantly impact the carrying amounts of the combined entity’s assets and liabilities, which can affect the combined entity’s post-transaction net income.
The proposed ASU would establish more consistent requirements to determine the accounting acquirer when a business is bought in a deal through exchanging equity interests.
The proposal closely aligns the requirements for determining the accounting acquirer in acquiring 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 deals.