{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/740/805/#30-initial-measurement","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":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"740-805-30-1","para":"30-1","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_800BF079-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">An <a href=\"/glossary/a/#acquirer\" class=\"term\" title=\"The entity that obtains control of the acquiree. However, in a business combination in which a variable interest entity (VIE) is acquired, the primary beneficiary of that entity always is the acquirer. (P) December 16, 2026; (N) December 16, 2026805-10-65-5The entity that obtains control of the acquiree.See paragraphs 805-10-25-4805-10-25-5 for guidance on determining the acquirer.\"><span>acquirer</span></a> shall measure a <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 asset</span></a> or <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 liability</span></a> arising from the assets acquired and liabilities assumed in a <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 combination</span></a> in accordance with Subtopic <a altsource=\"GUID-3B0818A8-1B9D-4530-82D4-22D4284B582F.ditamap\" class=\"ditamap\">740-10</a>. </span></span> <span class=\"sfragment\" id=\"sfr_800BF1B4-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Discounting deferred tax assets or liabilities is prohibited for <a href=\"/glossary/t/#temporary-difference\" class=\"term\" title=\"A difference between the tax basis of an asset or liability computed pursuant to the requirements in Subtopic 740-10 for tax positions, and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively. Paragraph 740-10-25-20 cites examples of temporary differences. Some temporary differences cannot be identified with a particular asset or liability for financial reporting (see paragraphs 740-10-05-10 and 740-10-25-24740-10-25-25), but those temporary differences do meet both of the following conditions: Result from events that have been recognized in the financial statements Will result in taxable or deductible amounts in future years based on provisions of the tax law. Some events recognized in financial statements do not have tax consequences. Certain revenues are exempt from taxation and certain expenses are not deductible. Events that do not have tax consequences do not give rise to temporary differences.\"><span>temporary differences</span></a> (except for <a href=\"/glossary/l/#leveraged-lease\" class=\"term\" title=\"From the perspective of a lessor, a lease that was classified as a leveraged lease in accordance with the leases guidance in effect before the effective date and for which the commencement date is before the effective date.\"><span>leveraged leases</span></a>, see Subtopic <a altsource=\"GUID-9B3AE0B5-9ADC-4C23-8C50-44ABCF9238C9.ditamap\" class=\"ditamap\">842-50</a>) related to business combinations as it is for other temporary differences. </span></span> </div> </div>","snippet":"An acquirer shall measure a deferred tax asset or deferred tax liability arising from the assets acquired and liabilities assumed in a business combination in accordance with Subtopic 740-10. Discounting deferred tax ass…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4523400640ab9730575675ddf28aa0901a6acf4ae33a351415e48e5a156cf4aa","downloaded_from":"2026-09-10T01:18:21.803Z","last_downloaded_at":"2026-09-10T01:18:21.803Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478530","source_sha256":"289170ed970eaeadfc409d6cdce1987a5a12c9f168d1bf11f2cb7ff8047e3c04"}},{"citation":"740-805-30-2","para":"30-2","html":"<div class=\"asc-body\"><div class=\"norm-text\">See Example 1 (paragraph <a href=\"/asc/740/805/#740-805-55-2\" class=\"xref\">805-740-55-2</a>) for an illustration of the measurement of deferred tax assets and a 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 allowance</span></a> at the date of a nontaxable business combination.</div> </div>","snippet":"See Example 1 (paragraph 805-740-55-2) for an illustration of the measurement of deferred tax assets and a related valuation allowance at the date of a nontaxable business combination.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c27246d0e822ce548c6fcb4070a511913c835224f599332cb8f7deb07726d1d0","downloaded_from":"2026-09-10T01:18:21.803Z","last_downloaded_at":"2026-09-10T01:18:21.803Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478530","source_sha256":"289170ed970eaeadfc409d6cdce1987a5a12c9f168d1bf11f2cb7ff8047e3c04"}},{"citation":"740-805-30-3","para":"30-3","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_800BF2F3-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The tax law in some tax jurisdictions may permit the future use of either of the combining entities' deductible temporary differences or <a href=\"/glossary/c/#carryforwards\" class=\"term\" title=\"Deductions or credits that cannot be utilized on the tax return during a year that may be carried forward to reduce taxable income or taxes payable in a future year. An operating loss carryforward is an excess of tax deductions over gross income in a year; a tax credit carryforward is the amount by which tax credits available for utilization exceed statutory limitations. Different tax jurisdictions have different rules about whether excess deductions or credits may be carried forward and the length of the carryforward period. The terms carryforward, operating loss carryforward, and tax credit carryforward refer to the amounts of those items, if any, reported in the tax return for the current year.\"><span>carryforwards</span></a> to reduce <a href=\"/glossary/t/#taxable-income\" class=\"term\" title=\"The excess of taxable revenues over tax deductible expenses and exemptions for the year as defined by the governmental taxing authority.\"><span>taxable income</span></a> or taxes payable attributable to the other entity after the business combination. If the combined entity expects to file a consolidated tax return, an acquirer may determine that as a result of the <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 combination</span></a> its valuation for its deferred tax assets should be changed. For example, the acquirer may be able to utilize the benefit of its tax operating loss carryforwards against the future taxable profit of the <a href=\"/glossary/a/#acquiree\" class=\"term\" title=\"The business or businesses that the acquirer obtains control of in a business combination. This term also includes a nonprofit activity or business that a not-for-profit acquirer obtains control of in an acquisition by a not-for-profit entity.\"><span>acquiree</span></a>. In such cases, the acquirer reduces its valuation allowance based on the weight of available evidence. However, that reduction does not enter into the accounting for the business combination but is recognized as an income tax benefit (or credited directly to contributed capital [see paragraph <a href=\"/asc/740/10/#740-10-45-20\" class=\"xref\">740-10-45-20</a>]). </span></span> </div> </div>","snippet":"The tax law in some tax jurisdictions may permit the future use of either of the combining entities' deductible temporary differences or carryforwards to reduce taxable income or taxes payable attributable to the other e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81677d54550a084fe2f673d628dea61891358267411a2fe82da246d9c1a8083d","downloaded_from":"2026-09-10T01:18:21.803Z","last_downloaded_at":"2026-09-10T01:18:21.803Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478530","source_sha256":"289170ed970eaeadfc409d6cdce1987a5a12c9f168d1bf11f2cb7ff8047e3c04"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ec1d11418c9c876d57c41bd1655b959c62279d2dbe4a018b1d7b7d67d9583252","downloaded_from":"2026-09-10T01:18:21.803Z","last_downloaded_at":"2026-09-10T01:18:21.803Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478530","source_sha256":"289170ed970eaeadfc409d6cdce1987a5a12c9f168d1bf11f2cb7ff8047e3c04"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9210cb12974bb0799331a296e8452fa9c3debe5d6aa379330998311447d8932","downloaded_from":"2026-09-10T01:18:21.803Z","last_downloaded_at":"2026-09-10T01:18:21.803Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478530","source_sha256":"289170ed970eaeadfc409d6cdce1987a5a12c9f168d1bf11f2cb7ff8047e3c04"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9210cb12974bb0799331a296e8452fa9c3debe5d6aa379330998311447d8932","downloaded_from":"2026-09-10T01:18:21.803Z","last_downloaded_at":"2026-09-10T01:18:21.803Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478530","source_sha256":"289170ed970eaeadfc409d6cdce1987a5a12c9f168d1bf11f2cb7ff8047e3c04"}}