{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/740/805/#35-subsequent-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":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"740-805-35-1","para":"35-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">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> may have a <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> for its own <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> at the time of 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>. The guidance in this Section addresses measurement of that valuation allowance and the potential need to distinguish the separate pasts of the acquirer and the acquired entity in the measurement of valuation allowances together with expected future results of operations. Guidance on the subsequent measurement of deferred tax assets or liabilities arising from the assets acquired and liabilities assumed in a business combination, and any income tax uncertainties of an acquiree that exist at the acquisition date, or that arise as a result of the acquisition, is provided in Subtopic <a altsource=\"GUID-3B0818A8-1B9D-4530-82D4-22D4284B582F.ditamap\" class=\"ditamap\">740-10</a>.</div></div>","snippet":"An acquirer may have a valuation allowance for its own deferred tax assets at the time of a business combination. The guidance in this Section addresses measurement of that valuation allowance and the potential need to d…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f5aefba6f6766a6eab472bb03e6029b3822e1053e62c670d89dc24e8fbb478f","downloaded_from":"2026-09-10T01:18:25.581Z","last_downloaded_at":"2026-09-10T01:18:25.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479067","source_sha256":"a74e0e027f86021b2bc115a8fa21e6ce7aab1bce5c3bdbb656f9211af1e340da"}},{"citation":"740-805-35-2","para":"35-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_8019192D-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Changes in the acquirer's valuation allowance, if any, that result from the business combination shall reflect any provisions in the tax law that restrict 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. </span></span></div></div>","snippet":"Changes in the acquirer's valuation allowance, if any, that result from the business combination shall reflect any provisions in the tax law that restrict the future use of either of the combining entities' deductible te…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fcbbb5836a43624c89a439f171fadf3fb85f08c76e57ed172aea9dbd7db921eb","downloaded_from":"2026-09-10T01:18:25.581Z","last_downloaded_at":"2026-09-10T01:18:25.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479067","source_sha256":"a74e0e027f86021b2bc115a8fa21e6ce7aab1bce5c3bdbb656f9211af1e340da"}},{"citation":"740-805-35-3","para":"35-3","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_80191A41-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Any changes in the acquirer's valuation allowance shall be accounted for in accordance with paragraph <a href=\"/asc/740/805/#740-805-30-3\" class=\"xref\">805-740-30-3</a>. For example, the tax law may limit the use of the acquired entity's deductible temporary differences and carryforwards to subsequent taxable income of the acquired entity included in a consolidated tax return for the combined entity. In that circumstance, or if the acquired entity will file a separate tax return, the need for a valuation allowance for some portion or all of the acquired entity's deferred tax assets for deductible temporary differences and carryforwards is assessed based on the acquired entity's separate past and expected future results of operations. </span></span></div></div>","snippet":"Any changes in the acquirer's valuation allowance shall be accounted for in accordance with paragraph 805-740-30-3. For example, the tax law may limit the use of the acquired entity's deductible temporary differences and…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f445bc75825b323a6382151130d45f303867e25f376e84048a2671b2dbc4b38c","downloaded_from":"2026-09-10T01:18:25.581Z","last_downloaded_at":"2026-09-10T01:18:25.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479067","source_sha256":"a74e0e027f86021b2bc115a8fa21e6ce7aab1bce5c3bdbb656f9211af1e340da"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:405473d2a0e40541abd82295c04a7fef1d8cab8701a8ec64022e5aaae75995a8","downloaded_from":"2026-09-10T01:18:25.581Z","last_downloaded_at":"2026-09-10T01:18:25.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479067","source_sha256":"a74e0e027f86021b2bc115a8fa21e6ce7aab1bce5c3bdbb656f9211af1e340da"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:afe52dd95c65a8e160f5b8fefd0860e4e617c69ab4f2d051a21077eaaef08131","downloaded_from":"2026-09-10T01:18:25.581Z","last_downloaded_at":"2026-09-10T01:18:25.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479067","source_sha256":"a74e0e027f86021b2bc115a8fa21e6ce7aab1bce5c3bdbb656f9211af1e340da"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:afe52dd95c65a8e160f5b8fefd0860e4e617c69ab4f2d051a21077eaaef08131","downloaded_from":"2026-09-10T01:18:25.581Z","last_downloaded_at":"2026-09-10T01:18:25.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479067","source_sha256":"a74e0e027f86021b2bc115a8fa21e6ce7aab1bce5c3bdbb656f9211af1e340da"}}