# ASC 740-805-45: Income Taxes — Business Combinations — 45 Other Presentation Matters Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/740/805/#45-other-presentation-matters) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:18:27.324Z to 2026-09-10T01:18:27.324Z Record version: sha256:46faa113c67e93b6091be28ebe5a2e537a2617b1e22dd113b2323c0bc3ac4ec1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 740-805-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/740/805/#45-other-presentation-matters) SEC content: no ##### [740-805-45-1](https://asc.understandingaccounting.org/asc/740/805/#740-805-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:18:27.324Z to 2026-09-10T01:18:27.324Z Record version: sha256:51a5910f5cd2e1fa8c60f78154a0b7f5648e7ae97e6b62472516e94f4e5f4beb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section addresses how an [acquirer](https://asc.understandingaccounting.org/glossary/a/#acquirer "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.") recognizes changes in [valuation allowances](https://asc.understandingaccounting.org/glossary/v/#valuation-allowance "The portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized.") and [tax positions](https://asc.understandingaccounting.org/glossary/t/#tax-position "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.") related to an acquisition and the accounting for tax deductions for replacement awards. #### Changes in Valuation Allowances ##### [740-805-45-2](https://asc.understandingaccounting.org/asc/740/805/#740-805-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:18:27.324Z to 2026-09-10T01:18:27.324Z Record version: sha256:394b5ff7ac5b212a66461164e01bcddf9b3efe49ecec35ffda0ddbae8f971e9f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect of a change in a valuation allowance for an acquired entity's [deferred tax asset](https://asc.understandingaccounting.org/glossary/d/#deferred-tax-asset "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.") shall be recognized as follows: 1. a Changes within the measurement period that result from new information about facts and circumstances that existed at the [acquisition date](https://asc.understandingaccounting.org/glossary/a/#acquisition-date "The date on which the acquirer obtains control of the acquiree.") shall be recognized through a corresponding adjustment to [goodwill](https://asc.understandingaccounting.org/glossary/g/#goodwill "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."). 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 [805-30-25-2 through 25-4](https://asc.understandingaccounting.org/asc/805/30/#805-30-25-2) . See paragraphs [805-10-25-13 through 25-19](https://asc.understandingaccounting.org/asc/805/10/#805-10-25-13) and [805-10-30-2 through 30-3](https://asc.understandingaccounting.org/asc/805/10/#805-10-30-2) for a discussion of the measurement period in the context of a [business combination](https://asc.understandingaccounting.org/glossary/b/#business-combination "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."). 2. b 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 [740-10-45-20 through 45-21](https://asc.understandingaccounting.org/asc/740/10/#740-10-45-20) ). ##### [740-805-45-3](https://asc.understandingaccounting.org/asc/740/805/#740-805-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:18:27.324Z to 2026-09-10T01:18:27.324Z Record version: sha256:21d69268b0c174259cca0d02dfa33b58f803793cf994cf1221ca90d0013cfecd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 2 (see paragraph [805-740-55-4](https://asc.understandingaccounting.org/asc/740/805/#740-805-55-4)) illustrates this guidance relating to accounting for a change in an acquired entity's valuation allowance. #### Changes in Tax Positions ##### [740-805-45-4](https://asc.understandingaccounting.org/asc/740/805/#740-805-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:18:27.324Z to 2026-09-10T01:18:27.324Z Record version: sha256:5e402491076aeaf083416945394a64286c8b9ad8562745f5dd04e4ffb2d5962e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect of a change to an acquired [tax position](https://asc.understandingaccounting.org/glossary/t/#tax-position "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."), or those that arise as a result of the acquisition, shall be recognized as follows: 1. a 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 [805-30-25-2 through 25-4](https://asc.understandingaccounting.org/asc/805/30/#805-30-25-2) . 2. b All other changes in acquired income tax positions shall be accounted for in accordance with the accounting requirements for tax positions established in Subtopic 740-10. #### Tax Deductions for Replacement Awards ##### [740-805-45-5](https://asc.understandingaccounting.org/asc/740/805/#740-805-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:18:27.324Z to 2026-09-10T01:18:27.324Z Record version: sha256:d9b4a851b1db568557eab7a401ea13a371c98884412cc77a22a98a1ed7b85362 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [805-30-30-9](https://asc.understandingaccounting.org/asc/805/30/#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 equity may be different from the [fair-value](https://asc.understandingaccounting.org/glossary/f/#fair-value "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.")\-based measure of the award. The tax effect of that difference shall be recognized as income tax expense or benefit in the income statement of the acquirer. ##### [740-805-45-6](https://asc.understandingaccounting.org/asc/740/805/#740-805-45-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:18:27.324Z to 2026-09-10T01:18:27.324Z Record version: sha256:89e8a419f53d21a0d8def24c821450f9812c9a16f6a6a14b65b80222b22c7731 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-09](https://asc.understandingaccounting.org/updates/asu-2016-09/).