FASB clarifies the definition of a business
Defining Issues | January 2017
The ASU sets out a new framework for classifying transactions as acquisitions (disposals) of assets vs. businesses.
KPMG reports on ASU 2017-01, which revises ASC 805 as part of FASB’s definition of a business project.
Applicability
ASU 2017-01
- A company with acquisition or disposal transactions
Relevant dates
Mandatory effective dates and early adoption provisions:
Effective dates
Mandatory effective dates and early adoption provisions:
Effective date : | Public business entities and certain not-for-profit entities | All other entities |
Annual periods – Fiscal years beginning after | Dec. 15, 2017 | Dec. 15, 2018 |
Interim periods – In fiscal years beginning after | Dec. 15, 2017 | Dec. 15, 2019 |
Early adoption allowed? | Yes – immediately for transactions that have not been reported in financial statements that have been issued or made available for issuance. | |
Key Impacts:
- An integrated set of activities and assets (a set) is a business if it has, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs
- ASU 2017-01 creates a 2-step method in assessing whether a transaction is an acquisition/disposal of assets or a business
- Fewer transactions are expected to involve acquiring or selling a business
- Real estate and life science industries will likely be most affected
Report contents
- Why does the definition of a business matter?
- Examples that illustrate the definition
- Effective dates and transition
- FASB’s next steps
Download the document:
FASB clarifies definition of a business
Download PDFExplore more
Resource
Handbook: Business combinations
Latest edition: Our in-depth guide to accounting for acquisitions of businesses, updated for recent application issues.
Reference Library
In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues.
Subscribe to stay informed
Receive the latest financial reporting and accounting updates with our newsletters and more delivered to your inbox.
Accounting Research Online
Access our accounting research website for additional resources for your financial reporting needs.