On May 12, the Financial Accounting Standards Board (FASB) published an Accounting Standards Update (ASU) that refines the requirements that identify the accounting acquirer in FASB Accounting Standards Codification Topic 805, Business Combinations.

The ASU is based on the Emerging Issues Task Force's  (EITF) recommendation. according to the board. 

“The new ASU is the first recommendation from the recently reconstituted EITF to be issued as a final standard, and we thank the group for providing a path forward in making financial reporting in this area more comparable and decision useful for investors,” noted FASB Chair Richard R. Jones.

The FASB explained that In a business combination, the determination of the accounting acquirer can considerably impact the carrying amounts of the combined entity’s assets and liabilities.

The ASU will alter current guidance for determining the accounting acquirer for a transaction effected mostly by exchanging equity interests where the legal acquiree is a variable interest entity that meets the definition of a business. The FASB said that the amendments require an entity to consider the same factors that are now required to determine the entity that is the accounting acquirer in other acquisition transactions.