{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/740/805/#45-other-presentation-matters","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":"45","label":"45 Other Presentation Matters","anchor":"45-other-presentation-matters","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"740-805-45-1","para":"45-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">This Section addresses how 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> recognizes changes in <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> and <a href=\"/glossary/t/#tax-position\" class=\"term\" title=\"A position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets. The term tax position also encompasses, but is not limited to: A decision not to file a tax return An allocation or a shift of income between jurisdictions The characterization of income or a decision to exclude reporting taxable income in a tax return A decision to classify a transaction, entity, or other position in a tax return as tax exempt An entity's status, including its status as a pass-through entity or a tax-exempt not-for-profit entity.\"><span>tax positions</span></a> related to an acquisition and the accounting for tax deductions for replacement awards.</div> </div>","snippet":"This Section addresses how an acquirer recognizes changes in valuation allowances and tax positions related to an acquisition and the accounting for tax deductions for replacement awards.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51a5910f5cd2e1fa8c60f78154a0b7f5648e7ae97e6b62472516e94f4e5f4beb","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f11fbd181880cc1dcb967ccc06fa25646c1b6f248ffb01a1421db1c7c96a0947","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}},{"block":null,"heading":"Changes in Valuation Allowances","paragraphs":[{"citation":"740-805-45-2","para":"45-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_802FEB7D-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The effect of a change in a valuation allowance for an acquired entity's <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> shall be recognized as follows: </span></span> <ol class=\"ol-norm\"> <li class=\"li-norm\"><span class=\"linum\">a</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_802FED46-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Changes within the measurement period that result from new information about facts and circumstances that existed at the <a href=\"/glossary/a/#acquisition-date\" class=\"term\" title=\"The date on which the acquirer obtains control of the acquiree.\"><span>acquisition date</span></a> shall be recognized through a corresponding adjustment to <a href=\"/glossary/g/#goodwill\" class=\"term\" title=\"An asset representing the future economic benefits arising from other assets acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation that are not individually identified and separately recognized. For ease of reference, this term also includes the immediate charge recognized by not-for-profit entities in accordance with paragraph 958-805-25-29.\"><span>goodwill</span></a>. However, once goodwill is reduced to zero, an acquirer shall recognize any additional decrease in the valuation allowance as a bargain purchase in accordance with paragraphs <div class=\"xref-range displayInline\"><a href=\"/asc/805/30/#805-30-25-2\" class=\"xref\">805-30-25-2 through 25-4</a></div>. </span></span> <span class=\"sfragment\" id=\"sfr_802FEEA4-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">See paragraphs <div class=\"xref-range displayInline\"><a href=\"/asc/805/10/#805-10-25-13\" class=\"xref\">805-10-25-13 through 25-19</a></div> and <div class=\"xref-range displayInline\"><a href=\"/asc/805/10/#805-10-30-2\" class=\"xref\">805-10-30-2 through 30-3</a></div> for a discussion of the measurement period in the context 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>. </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">b</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_802FEFDA-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">All other changes shall be reported as a reduction or increase to income tax expense (or a direct adjustment to contributed capital as required by paragraphs <div class=\"xref-range displayInline\"><a href=\"/asc/740/10/#740-10-45-20\" class=\"xref\">740-10-45-20 through 45-21</a></div>). </span></span> </div> </li> </ol> </div> </div>","snippet":"The effect of a change in a valuation allowance for an acquired entity's deferred tax asset shall be recognized as follows:\n(a) Changes within the measurement period that result from new information about facts and circu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:394b5ff7ac5b212a66461164e01bcddf9b3efe49ecec35ffda0ddbae8f971e9f","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}},{"citation":"740-805-45-3","para":"45-3","html":"<div class=\"asc-body\"><div class=\"norm-text\">Example 2 (see paragraph <a href=\"/asc/740/805/#740-805-55-4\" class=\"xref\">805-740-55-4</a>) illustrates this guidance relating to accounting for a change in an acquired entity's valuation allowance.</div> </div>","snippet":"Example 2 (see paragraph 805-740-55-4) illustrates this guidance relating to accounting for a change in an acquired entity's valuation allowance.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21d69268b0c174259cca0d02dfa33b58f803793cf994cf1221ca90d0013cfecd","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ca6f04f3abb47b16317fd4b9b05222990d5f1b74403b88c981c07507c431fa6b","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}},{"block":null,"heading":"Changes in Tax Positions","paragraphs":[{"citation":"740-805-45-4","para":"45-4","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_802FF10D-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The effect of a change to an acquired <a href=\"/glossary/t/#tax-position\" class=\"term\" title=\"A position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets. The term tax position also encompasses, but is not limited to: A decision not to file a tax return An allocation or a shift of income between jurisdictions The characterization of income or a decision to exclude reporting taxable income in a tax return A decision to classify a transaction, entity, or other position in a tax return as tax exempt An entity's status, including its status as a pass-through entity or a tax-exempt not-for-profit entity.\"><span>tax position</span></a>, or those that arise as a result of the acquisition, shall be recognized as follows: </span></span> <ol class=\"ol-norm\"> <li class=\"li-norm\"><span class=\"linum\">a</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_802FF248-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Changes within the measurement period that result from new information about facts and circumstances that existed as of the acquisition date shall be recognized through a corresponding adjustment to goodwill. However, once goodwill is reduced to zero, the remaining portion of that adjustment shall be recognized as a gain on a bargain purchase in accordance with paragraphs <div class=\"xref-range displayInline\"><a href=\"/asc/805/30/#805-30-25-2\" class=\"xref\">805-30-25-2 through 25-4</a></div>. </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">b</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_802FF377-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">All other changes in acquired income tax positions shall be accounted for in accordance with the accounting requirements for tax positions established in Subtopic <a altsource=\"GUID-3B0818A8-1B9D-4530-82D4-22D4284B582F.ditamap\" class=\"ditamap\">740-10</a>. </span></span> </div> </li> </ol> </div> </div>","snippet":"The effect of a change to an acquired tax position, or those that arise as a result of the acquisition, shall be recognized as follows:\n(a) Changes within the measurement period that result from new information about fac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e402491076aeaf083416945394a64286c8b9ad8562745f5dd04e4ffb2d5962e","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ec64974f0fe8af332a838efa424c5a26f38a4d64643923454dc511a096dc6833","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}},{"block":null,"heading":"Tax Deductions for Replacement Awards","paragraphs":[{"citation":"740-805-45-5","para":"45-5","html":"<div class=\"asc-body\"><div class=\"norm-text\">Paragraph <a href=\"/asc/805/30/#805-30-30-9\" class=\"xref\">805-30-30-9</a> identifies the types of awards that are referred to as replacement awards in this Topic. <span class=\"sfragment\" id=\"sfr_802FF4AF-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">After the acquisition date, the deduction reported on a tax return for a replacement award classified as equity may be different from the <a href=\"/glossary/f/#fair-value\" class=\"term\" title=\"The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.\"><span>fair-value</span></a>-based measure of the award. </span></span><span class=\"sfragment\" id=\"sfr_802FF5B8-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The tax effect of that difference shall be recognized as income tax expense or benefit in the income statement of the acquirer.</span></span></div> </div>","snippet":"Paragraph 805-30-30-9 identifies the types of awards that are referred to as replacement awards in this Topic. After the acquisition date, the deduction reported on a tax return for a replacement award classified as equi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9b4a851b1db568557eab7a401ea13a371c98884412cc77a22a98a1ed7b85362","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}},{"citation":"740-805-45-6","para":"45-6","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <a href=\"/updates/asu-2016-09/\" class=\"xref\">Paragraph superseded by Accounting Standards Update No. 2016-09</a>.</div> </div>","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-09.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:89e8a419f53d21a0d8def24c821450f9812c9a16f6a6a14b65b80222b22c7731","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:012f2a99dcaa78c122f1345be408844bfc8859f6d4730cf096c4e3fa04d5d1b5","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46faa113c67e93b6091be28ebe5a2e537a2617b1e22dd113b2323c0bc3ac4ec1","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46faa113c67e93b6091be28ebe5a2e537a2617b1e22dd113b2323c0bc3ac4ec1","downloaded_from":"2026-09-10T01:18:27.324Z","last_downloaded_at":"2026-09-10T01:18:27.324Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477883","source_sha256":"5dadd9d25cc6ecf32d51b73d5214464a2d85de2650d2798e77d1d3d34c6e5be8"}}