{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/740/805/#05-overview-and-background","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"740","topic_title":"Income Taxes","subtopic":"740-805","subtopic_title":"Business Combinations","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"740-805-05-1","para":"05-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">This Subtopic provides incremental guidance on accounting for <a href=\"/glossary/i/#income-taxes\" class=\"term\" title=\"Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.\"><span>income taxes</span></a> related to <a href=\"/glossary/b/#business-combination\" class=\"term\" title=\"A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as true mergers or mergers of equals also are business combinations. See also Acquisition by a Not-for-Profit Entity.\"><span>business combinations</span></a> and to <a href=\"/glossary/a/#acquisition-by-a-not-for-profit-entity\" class=\"term\" title=\"A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities.\"><span>acquisitions by not-for-profit entities</span></a>. <span class=\"sfragment\" id=\"sfr_7FB0A9D8-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">This Subtopic requires recognition of <a href=\"/glossary/d/#deferred-tax-liability\" class=\"term\" title=\"The deferred tax consequences attributable to taxable temporary differences. A deferred tax liability is measured using the applicable enacted tax rate and provisions of the enacted tax law.\"><span>deferred tax liabilities</span></a> and <a href=\"/glossary/d/#deferred-tax-asset\" class=\"term\" title=\"The deferred tax consequences attributable to deductible temporary differences and carryforwards. A deferred tax asset is measured using the applicable enacted tax rate and provisions of the enacted tax law. A deferred tax asset is reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.\"><span>deferred tax assets</span></a> (and related <a href=\"/glossary/v/#valuation-allowance\" class=\"term\" title=\"The portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized.\"><span>valuation allowances</span></a>, if necessary) for the <a href=\"/glossary/d/#deferred-tax-consequences\" class=\"term\" title=\"The future effects on income taxes as measured by the applicable enacted tax rate and provisions of the enacted tax law resulting from temporary differences and carryforwards at the end of the current year.\"><span>deferred tax consequences</span></a> of differences between the tax bases and the recognized values of assets acquired and liabilities assumed in a business combination </span></span><span class=\"sfragment\" id=\"sfr_7FB0AB3E-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">or in an acquisition by a not-for-profit entity.</span></span></div></div>","snippet":"This Subtopic provides incremental guidance on accounting for income taxes related to business combinations and to acquisitions by not-for-profit entities. This Subtopic requires recognition of deferred tax liabilities a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7a21c61d20d40e0daaae1c07b401b4c53d0b2bfb875ad4b4f91c367ae7560f3a","downloaded_from":"2026-09-10T01:18:10.131Z","last_downloaded_at":"2026-09-10T01:18:10.131Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478583","source_sha256":"3e0e087f6d695666452792068ab52bc2501766fa73a310142d5c4a3b95282a0d"}},{"citation":"740-805-05-2","para":"05-2","html":"<div class=\"asc-body\"><div class=\"norm-text\">The recognition and measurement requirements related to accounting for income taxes in this Subtopic are exceptions to the recognition and measurement principles that are otherwise required for business combinations and acquisitions by not-for-profit entities, as established in Sections <a altsource=\"GUID-0803222F-FBB7-425F-9225-DA53A12A7189.ditamap\" class=\"ditamap\">805-20-25</a> and <a altsource=\"GUID-80FCAE5E-1B96-4E74-B32F-73F7702DF811.ditamap\" class=\"ditamap\">805-20-30</a>.</div></div>","snippet":"The recognition and measurement requirements related to accounting for income taxes in this Subtopic are exceptions to the recognition and measurement principles that are otherwise required for business combinations and …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:262eafe07cb1672f329c4bfbac659863db449ae8b2092a646a645bfe86225bb9","downloaded_from":"2026-09-10T01:18:10.131Z","last_downloaded_at":"2026-09-10T01:18:10.131Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478583","source_sha256":"3e0e087f6d695666452792068ab52bc2501766fa73a310142d5c4a3b95282a0d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:29d07365cb820e38e38a38b47e639c7f72e4807d37cf1f3ba90b6941d7b42a89","downloaded_from":"2026-09-10T01:18:10.131Z","last_downloaded_at":"2026-09-10T01:18:10.131Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478583","source_sha256":"3e0e087f6d695666452792068ab52bc2501766fa73a310142d5c4a3b95282a0d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21c4112a3e2f1beffd8bba4dd98bb383fd37a542255ec4e95bee8a3b4ccd714a","downloaded_from":"2026-09-10T01:18:10.131Z","last_downloaded_at":"2026-09-10T01:18:10.131Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478583","source_sha256":"3e0e087f6d695666452792068ab52bc2501766fa73a310142d5c4a3b95282a0d"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21c4112a3e2f1beffd8bba4dd98bb383fd37a542255ec4e95bee8a3b4ccd714a","downloaded_from":"2026-09-10T01:18:10.131Z","last_downloaded_at":"2026-09-10T01:18:10.131Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478583","source_sha256":"3e0e087f6d695666452792068ab52bc2501766fa73a310142d5c4a3b95282a0d"}}