Improving the Accounting for Asset Acquisitions and Business Combinations (Phase 3 of the Definition of a Business Project) (removed from agenda June 15, 2022)


The objective of this project (Phase 3) was to improve the accounting for asset acquisitions and business combinations by narrowing the differences between the recognition 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. The project was split into three phases:
  1. Phase 1: Clarify the definition of a business.
  2. Phase 2: Clarify 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 address 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 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.

Final Project Update:

During the June 15, 2022 Board meeting, the Board continued initial deliberations on the initial and subsequent recognition and measurement of contingent consideration arrangements that are classified as assets or liabilities and accounted for under Topic 805, Business Combinations. No consensus was reached. The Board also discussed feedback received on this project in response to the 2021 Invitation to Comment, Agenda Consultation. On the basis of research performed and feedback received to date, the Board decided to deprioritize the project at this time and to remove it from the technical agenda.