Project Update

Improving the Accounting for Asset Acquisitions and Business Combinations
(Phase 3 of the Definition of a Business Project)

Last updated on August 10, 2017. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective and Background Information
Due Process Documents
*Decisions Reached at Last Meeting
*Tentative Board Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates
*Contact Information

PROJECT OBJECTIVE AND BACKGROUND INFORMATION

The objective of this project (Phase 3) is to improve the accounting for asset acquisitions and business combinations by aligning the accounting for the recognition and derecognition of assets and businesses.

On May 29, 2013, the Board added a project to its agenda on clarifying the definition of a business with the objective of adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or acquisitions (or disposals) of businesses. At its October 8, 2014 meeting, the Board decided to split the project into three phases:
  1. Phase 1: Clarify the definition of a business.
  2. Phase 2: Address (a) the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and clarify the reference to in substance nonfinancial assets and (b) the guidance on partial sales or transfers of assets within the scope of Subtopic 610-20 and the corresponding accounting for retained interests in those assets.
  3. Phase 3: Discuss whether there are differences in the acquisition and derecognition guidance for assets and businesses that could be aligned.
The Board decided to approach this project in phases because of the interdependency of the topics.

For more information on the first two phases, see the following:

Phase 1: Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business
Phase 2: Accounting Standards Update No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets

DUE PROCESS DOCUMENTS 

No due process documents have been issued for Phase 3.

*DECISIONS REACHED AT LAST MEETING (AUGUST 2, 2017)

The Board decided that the project should address differences in the accounting for acquisitions of assets and of businesses, rather than addressing differences in the accounting for sales or the derecognition of assets and of businesses.

The Board decided that the project would focus on certain areas within the acquisition models, specifically the accounting for transaction costs, in process research and development (IPR&D), and contingent consideration.

The Board also directed the staff to consider whether certain exceptions in the accounting for business combinations should be extended to the accounting for acquisitions of assets, including the reassessment of certain contracts (such as leases) and the measurement exceptions associated with reacquired rights, indemnification assets, and leases.

*TENTATIVE BOARD DECISIONS REACHED TO DATE (As of August 2, 2017)

See Decisions Reached at Last Meeting.

*NEXT STEPS

The staff will perform research to be presented to the Board during deliberations.

*BOARD/OTHER PUBLIC MEETING DATES

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*August 2, 2017 Board Meeting—The Board discussed the scope and direction of Phase 3 of the project
October 8, 2014 Board Meeting—Non-decision-making meeting to provide an update on research performed and to get feedback from the Board on the direction of the project. The Board directed the staff to focus on clarifying the definition of a business, while continuing to research potential solutions for differences in the recognition and derecognition accounting for assets and businesses.

*CONTACT INFORMATION

Adriana Yepes
Supervising Project Manager
ayepes@fasb.org
Carly Lapins
Postgraduate Technical Assistant
clapins@fasb.org