FASB issues business combination amendments
Defining Issues | October 2021
KPMG reports on changes to accounting for revenue contracts acquired in a business combination.
The amendments require an acquirer to recognize and measure contract assets and contract liabilities in a business combination based on the guidance of ASC 606 rather than fair value.
Relevant dates
Effective date | Public entities | All other entities |
|---|---|---|
Annual periods – Fiscal years beginning after | December 15, 2022 | December 15, 2023 |
Interim periods – In fiscal years beginning after | December 15, 2022 | December 15, 2023 |
Early adoption allowed in fiscal years beginning after | Immediately | Immediately |
Key Impacts:
- Requires entities to use principles in ASC 606 to recognize and measure contract assets and liabilities in revenue contracts acquired in a business combination rather than fair value.
- Does not change the requirements to recognize and measure, (at fair value), other customer-contract intangibles – e.g. backlog intangible, favorable contract intangible, unfavorable contract liability.
- Early adoption is permitted, including adoption in an interim period. If early adopted early, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption.
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FASB issues business combination amendments
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Resource
Handbook: Business combinations
Latest edition: Our in-depth guide to accounting for acquisitions of businesses, updated for recent application issues.
Resource
Handbook: Revenue recognition
Latest edition: Our in-depth guide to the revenue standard, ASC 606.
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