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U.S. GAAP Accounting Standards
Codification Topic 805: Business Combinations


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Codification Topic 805
Business Combinations


Business Combinations

SFAS No. 141R, Revised in December 2007
"Business Combinations"

FSP FAS 141R-1, April 2009
"Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies"

Acquisition Method
Acquisition method is applied for business combinations

Steps of acquisition method:
1. Acquirer
2. Acquisition date
3. Assets, liabilities, noncontrolling interest
4. Goodwill

Acquirer
One entity should be identified as the acuquirer

Acquisition date
The acquirer obtains control at the acquisition date

Recognition principle
The following are recognized at the acquisition date:
1. Assets
2. Liabilities
3. Noncontrolling interest
4. Goodwill

Measurement principle
The following are measured at the acquisition-date fair values:
1. Assets
2. Liabilities
3. Noncontrolling interest

Exceptions to Recognition and Measurement Principles
1. Assets and liabilities arising from contingencies
2. Income taxes
3. Employee benefits
4. Indemnification assets

Exceptions to the Measurement Principle
1. Reacquired assets
2. Share-based payment awards
3. Assets held for sale

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

Consideration transferred
Consideration transferred is measured at fair value
Contingent consideration is measured at the acquisition-date fair value

Share-based payment awards exchanged for acquiree's employees
Modification of share-based payment awards under SFAS 123R

Business combinations  
--> achieved in stages
Previously held equity interest is remeasured at the acquisition-date fair value
Changes in fair value are recognized in earnings as gains or losses

Business combinations  
--> achieved without the transfer of consideration
--> achieved by contract alone
Rules of acquisition method are applied
--> even if all equity interests are allocated to NCI

Acquisition-related costs
--> recognized as expenses
One exception for the issuance costs of debt or equity securities
--> apply related GAAP


International Financial Reporting Standards (IFRS)

   IFRS 3: Business combinations



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   Codification Topic 805
   Business Combinations
 
Subtopics of Codification Topic 805
 
   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
 
Accounting Terms of Codification Topic 805-10
 
   Acquiree
   Acquirer
   Acquisition date
   Business
   Business combination
   Contingent consideration
   Control
   Equity interests
   Fair value
   Goodwill
   Identifiable
   Intangible assets
   Market participants
   Mutual entity
   Noncontrolling interest
   Owners
   Public entity
   Related parties
   Reverse acquisition
   Variable interest entity

 
Accounting Terms of Codification Topic 805-20
 
   Bargain purchase option
   Bargain renewal option
   Contingency
   Defensive intangible asset
   Estimated residual value
   Gain contingency
   Indirectly related to the leased property
   Lease term
   Loss contingency
   Mineral rights
   Noncancelable lease term
   Penalty
 
Accounting Terms of Codification Topic 805-30
 
   Requisite service period

 
Accounting Terms of Codification Topic 805-40
 

 
Accounting Terms of Codification Topic 805-50
 
   Dropdown
   Pushdown accounting
   Reorganization
   Rollout
   Rollup
 

 

   Other Topics at the Codification 800 
Accounting Standards Codification, ASC, Overview
 
ASC Codification Topic 805: Business Combinations
ASC Codification Topic 808: Collaborative Arrangements
 
ASC Codification Topic 810: Consolidation
ASC Codification Topic 815: Derivatives and Hedging
 
ASC Codification Topic 820: Fair Value Measurements and Disclosures
ASC Codification Topic 825: Financial Instruments
 
ASC Codification Topic 830: Foreign Currency Matters
ASC Codification Topic 835: Interest
 
ASC Codification Topic 840: Leases
ASC Codification Topic 845: Nonmonetary Transactions
 
ASC Codification Topic 850: Related Party Disclosures
ASC Codification Topic 852: Reorganizations
ASC Codification Topic 855: Subsequent Events
 
ASC Codification Topic 860: Transfers and Servicing


   U.S. GAAP Codification of Accounting Standards
Accounting Standards Codification, ASC, Overview
ASC Codification 200: Presentation
ASC Codification 300: Assets
ASC Codification 400: Liabilities
ASC Codification 500: Equity
ASC Codification 600: Revenue
ASC Codification 700: Expenses
ASC Codification 800: Broad Transactions
ASC Codification 900: Industry

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