On March 5, the Financial Accounting Standards Board (FASB) voted to advance an exposure draft—issued last Oct. 30—that proposed updates to Business Combinations (Topic 805) and Consolidation (Topic 810), according to Bloomberg Tax.

According to Bloomberg Tax, FASB noted that the advantages of more consistent rules for identifying the acquiring entity justify implementation costs. Comments or feedback, which were due last Dec. 16, pointed to those expenses not being considerable, FASB stated. The board is set to vote on a final plan via written ballot.

The exposure draft clarifies the determination of the accounting acquirer in transactions involving variable interest entities (VIEs).

This update also seeks to address stakeholder concerns about inconsistencies in financial reporting outcomes when VIEs are involved in business acquisitions.  

Currently, the primary beneficiary of a VIE is automatically considered the accounting acquirer. However, stakeholders have noted that this approach lacks comparability with transactions involving non-VIE entities.

The proposed amendments would require entities acquiring a VIE that qualifies as a business to assess specific factors—similar to those used in traditional business combinations—to determine the accounting acquirer.

This change could result in more transactions being classified as reverse acquisitions or not meeting the definition of a business combination.  

If adopted, the amendments would enhance comparability in financial reporting and improve decision-useful information for investors.