# ASC 805-10-05: Business Combinations — Overall — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/805/10/#05-overview-and-background) 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): 2026-09-10T01:22:19.043Z to 2026-09-10T01:22:19.043Z Record version: sha256:e66fc8ead34cf1c4bf4043061c3d11d22b25cd4c45390e53bd4245d869df3985 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/805/10/#05-overview-and-background) SEC content: no ##### [805-10-05-1](https://asc.understandingaccounting.org/asc/805/10/#805-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:22:19.043Z to 2026-09-10T01:22:19.043Z Record version: sha256:e0898cd55938aff8e22e82157c926361b2544cdc9f4ce14efbd2e2ad63fe3405 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Business Combinations Topic provides guidance on the accounting and reporting for transactions that represent [business combinations](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.") to be accounted for under the acquisition method (as described in paragraph [805-10-05-4](https://asc.understandingaccounting.org/asc/805/10/#805-10-05-4)). In addition, the Topic includes Subtopic 805-50, which provides guidance on transactions sometimes associated with business combinations but that do not meet the requirements to be accounted for as business combinations under the acquisition method, and Subtopic 805-60, which provides guidance on the formation of a [joint venture](https://asc.understandingaccounting.org/glossary/j/#joint-venture "An entity owned and operated by a small group of businesses (the joint venturers) as a separate and specific business or project for the mutual benefit of the members of the group. A government may also be a member of the group. The purpose of a joint venture frequently is to share risks and rewards in developing a new market, product, or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. A joint venture also usually provides an arrangement under which each joint venturer may participate, directly or indirectly, in the overall management of the joint venture. Joint venturers thus have an interest or relationship other than as passive investors. An entity that is a subsidiary of one of the joint venturers is not a joint venture. The ownership of a joint venture seldom changes, and its equity interests usually are not traded publicly. A minority public ownership, however, does not preclude an entity from being a joint venture. As distinguished from a corporate joint venture, a joint venture is not limited to corporate entities."). The Business Combinations Topic includes the following Subtopics: 1. a Overall 2. b Identifiable Assets and Liabilities, and Any Noncontrolling Interest 3. c Goodwill or Gain from Bargain Purchase, Including Consideration Transferred 4. d Reverse Acquisitions 5. e Related Issues 6. f Income Taxes 7. g Joint Venture Formations. ##### [805-10-05-2](https://asc.understandingaccounting.org/asc/805/10/#805-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:22:19.043Z to 2026-09-10T01:22:19.043Z Record version: sha256:059e83eb1499b835483be52705a0c48498989154dda21df3d0cda2d56b6619bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To accomplish the objective identified in paragraph [805-10-10-1](https://asc.understandingaccounting.org/asc/805/10/#805-10-10-1), this Topic establishes principles and requirements for how the [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.") does each of the following: 1. a Recognizes and measures in its financial statements the [identifiable](https://asc.understandingaccounting.org/glossary/i/#identifiable "An asset is identifiable if it meets either of the following criteria: It is separable, that is, capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability, regardless of whether the entity intends to do so. It arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.") assets acquired, the liabilities assumed, and any [noncontrolling interest](https://asc.understandingaccounting.org/glossary/n/#noncontrolling-interest "The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest.") in the [acquiree](https://asc.understandingaccounting.org/glossary/a/#acquiree "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.") 2. b Recognizes and measures the [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.") acquired in the business combination or a gain from a bargain purchase 3. c Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. ##### [805-10-05-3](https://asc.understandingaccounting.org/asc/805/10/#805-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:22:19.043Z to 2026-09-10T01:22:19.043Z Record version: sha256:f5bdd2b5b9369282cf6f258ec13b6ef2976e68389bbeb2baf8962c7c8f12a78b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic and Subtopics 805-20 and 805-30 address specific aspects of the acquisition method. Subtopic 805-20 addresses the recognition and measurement of identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. Subtopic 805-30 addresses the recognition and measurement of goodwill or a gain from a bargain purchase. This Subtopic addresses requirements of the acquisition method, as outlined in the following paragraph, not addressed by those two Subtopics, including the following: 1. a Whether a particular transaction or event is a business combination 2. b The identification of the acquirer and the [acquisition date](https://asc.understandingaccounting.org/glossary/a/#acquisition-date "The date on which the acquirer obtains control of the acquiree.") 3. c The period of time that an acquirer has to adjust provisional amounts, referred to as the measurement period 4. d The determination of what is part of a business combination transaction. ##### [805-10-05-4](https://asc.understandingaccounting.org/asc/805/10/#805-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:22:19.043Z to 2026-09-10T01:22:19.043Z Record version: sha256:ce19847917594fc7991d88eeef43294b0fb19a708fe31a3df750ac44d045e0fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [805-10-25-1](https://asc.understandingaccounting.org/asc/805/10/#805-10-25-1) requires that a business combination be accounted for by applying what is referred to as the acquisition method. The acquisition method requires all of the following steps: 1. a Identifying the acquirer 2. b Determining the acquisition date 3. c Recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree 4. d Recognizing and measuring goodwill or a gain from a bargain purchase. ##### [805-10-05-5](https://asc.understandingaccounting.org/asc/805/10/#805-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:22:19.043Z to 2026-09-10T01:22:19.043Z Record version: sha256:17c0a3be0b1ba2223656e25b9de77c7e9bcd36ab68134730fccf7c7485d13ed2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses steps (a) and (b) of the acquisition method as listed in the preceding paragraph. Subtopic 805-20 addresses step (c) and Subtopic 805-30 addresses step (d). ##### [805-10-05-6](https://asc.understandingaccounting.org/asc/805/10/#805-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:22:19.043Z to 2026-09-10T01:22:19.043Z Record version: sha256:e63c041151624c0aecfb9bad68ac280182e92199720bc84c13bc360edd7a4197 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs presented in bold type in this Topic state the main principles. All paragraphs have equal authority.