{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/805/10/#55-implementation-guidance-and-illustrations","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":"805","topic_title":"Business Combinations","subtopic":"805-10","subtopic_title":"Overall","section":{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"805-10-55-1","para":"55-1","html":"
This Section is an integral part of the requirements of this Subtopic. This Section provides additional guidance and illustrations that address the general application of accounting requirements for business combinations.
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Paragraph 805-10-25-1 requires an entity to determine whether a transaction or event is a business combination. In a business combination, an acquirer might obtain control of an acquiree in a variety of ways, including any of the following:
  1. a
    By transferring cash, cash equivalents, or other assets (including net assets that constitute a business)
  2. b
    By incurring liabilities
  3. c
    By issuing equity interests
  4. d
    By providing more than one type of consideration
  5. e
    Without transferring consideration, including by contract alone (see paragraph 805-10-25-11).
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A business combination may be structured in a variety of ways for legal, taxation, or other reasons, which include but are not limited to, the following:
  1. a
    One or more businesses become subsidiaries of an acquirer or the net assets of one or more businesses are legally merged into the acquirer.
  2. b
    One combining entity transfers its net assets or its owners transfer their equity interests to another combining entity or its owners.
  3. c
    All of the combining entities transfer their net assets or the owners of those entities transfer their equity interests to a newly formed entity (sometimes referred to as a roll-up or put-together transaction).
  4. d
    A group of former owners of one of the combining entities obtains control of the combined entity.
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A business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants. To be considered a business, an integrated set must meet the requirements in paragraphs
805-10-55-4 through 55-6
and
805-10-55-8 through 55-9
.
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A business consists of inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. Although businesses usually have outputs, outputs are not required for an integrated set to qualify as a business. The three elements of a business are defined as follows:
  1. a
    Input. Any economic resource that creates, or has the ability to contribute to the creation of, outputs when one or more processes are applied to it. Examples include long-lived assets (including intangible assets or rights to use long-lived assets), intellectual property, the ability to obtain access to necessary materials or rights, and employees.
  2. b
    Process. Any system, standard, protocol, convention, or rule that when applied to an input or inputs, creates or has the ability to contribute to the creation of outputs. Examples include strategic management processes, operational processes, and resource management processes. These processes typically are documented, but the intellectual capacity of an organized workforce having the necessary skills and experience following rules and conventions may provide the necessary processes that are capable of being applied to inputs to create outputs. Accounting, billing, payroll, and other administrative systems typically are not processes used to create outputs.
  3. c
    Output. The result of inputs and processes applied to those inputs that provide goods or services to customers, investment income (such as dividends or interest), or other revenues.
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To be capable of being conducted and managed for the purposes described in paragraph 805-10-55-3A, an integrated set of activities and assets requires two essential elements—inputs and processes applied to those inputs. A business need not include all the inputs or processes that the seller used in operating that business. However, to be considered a business, the set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Paragraphs
805-10-55-5A through 55-5C
provide a practical screen to determine when a set would not be considered a business. If the screen is not met, further assessment is necessary to determine whether the set is a business. Paragraphs
805-10-55-5D through 55-6
and
805-10-55-8 through 55-9
provide a framework to assist an entity in evaluating whether the set includes both an input and a substantive process.
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If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business. Gross assets acquired should exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. However, the gross assets acquired should include any consideration transferred (plus the fair value of any noncontrolling interest and previously held interest, if any) in excess of the fair value of net identifiable assets acquired.
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A single identifiable asset includes any individual asset or group of assets that could be recognized and measured as a single identifiable asset in a business combination. However, for purposes of this evaluation, the following should be considered a single asset:
  1. a
    A tangible asset that is attached to and cannot be physically removed and used separately from another tangible asset (or an intangible asset representing the right to use a tangible asset) without incurring significant cost or significant diminution in utility or fair value to either asset (for example, land and building)
  2. b
    In-place lease intangibles, including favorable and unfavorable intangible assets or liabilities, and the related leased assets.
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A group of similar assets includes multiple assets identified in accordance with paragraph 805-10-55-5B. When evaluating whether assets are similar, an entity should consider the nature of each single identifiable asset and the risks associated with managing and creating outputs from the assets (that is, the risk characteristics). However, the following should not be considered similar assets:
  1. a
    A tangible asset and an intangible asset
  2. b
    Identifiable intangible assets in different major intangible asset classes (for example, customer-related intangibles, trademarks, and in-process research and development)
  3. c
    A financial asset and a nonfinancial asset
  4. d
    Different major classes of financial assets (for example, accounts receivable and marketable securities)
  5. e
    Different major classes of tangible assets (for example, inventory, manufacturing equipment, and automobiles)
  6. f
    Identifiable assets within the same major asset class that have significantly different risk characteristics.
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When a set does not have outputs (for example, an early stage company that has not generated revenues), the set will have both an input and a substantive process that together significantly contribute to the ability to create outputs only if it includes employees that form an organized workforce and an input that the workforce could develop or convert into output. The organized workforce must have the necessary skills, knowledge, or experience to perform an acquired process (or group of processes) that when applied to another acquired input or inputs is critical to the ability to develop or convert that acquired input or inputs into outputs. An entity should consider the following in evaluating whether the acquired workforce is performing a substantive process:
  1. a
    A process (or group of processes) is not critical if, for example, it is considered ancillary or minor in the context of all the processes required to create outputs.
  2. b
    Inputs that employees who form an organized workforce could develop (or are developing) or convert into outputs could include the following:
    1. 1
      Intellectual property that could be used to develop a good or service
    2. 2
      Resources that could be developed to create outputs
    3. 3
      Access to necessary materials or rights that enable the creation of future outputs.
    Examples of inputs that could be developed include technology, mineral interests, real estate, and in-process research and development.
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When the set has outputs (that is, there is a continuation of revenue before and after the transaction), the set will have both an input and a substantive process that together significantly contribute to the ability to create outputs when any of the following are present:
  1. a
    Employees that form an organized workforce that has the necessary skills, knowledge, or experience to perform an acquired process (or group of processes) that when applied to an acquired input or inputs is critical to the ability to continue producing outputs. A process (or group of processes) is not critical if, for example, it is considered ancillary or minor in the context of all of the processes required to continue producing outputs.
  2. b
    An acquired contract that provides access to an organized workforce that has the necessary skills, knowledge, or experience to perform an acquired process (or group of processes) that when applied to an acquired input or inputs is critical to the ability to continue producing outputs. An entity should assess the substance of an acquired contract and whether it has effectively acquired an organized workforce that performs a substantive process (for example, considering the duration and the renewal terms of the contract).
  3. c
    The acquired process (or group of processes) when applied to an acquired input or inputs significantly contributes to the ability to continue producing outputs and cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.
  4. d
    The acquired process (or group of processes) when applied to an acquired input or inputs significantly contributes to the ability to continue producing outputs and is considered unique or scarce.
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If a set has outputs, continuation of revenues does not on its own indicate that both an input and a substantive process have been acquired. Accordingly, assumed contractual arrangements that provide for the continuation of revenues (for example, customer contracts, customer lists, and leases [when the set is the lessor]) should be excluded from the analysis in paragraph 805-10-55-5E of whether a process has been acquired.
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The nature of the elements of a business varies by industry and by the structure of an entity's operations (activities), including the entity's stage of development. Established businesses often have many different types of inputs, processes, and outputs, whereas new businesses often have few inputs and processes and sometimes only a single output (product). Nearly all businesses also have liabilities, but a business need not have liabilities. In addition, some transferred sets of assets and activities that are not a business may have liabilities.
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Paragraph superseded by Accounting Standards Update No. 2017-01.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-01.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7864691d17a2725b8bd78ea7f2e62d0ee2a867ed356004a2df91fb22a445397b","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-8","para":"55-8","html":"
Determining whether a particular set of assets and activities is a business should be based on whether the integrated set is capable of being conducted and managed as a business by a market participant. Thus, in evaluating whether a particular set is a business, it is not relevant whether a seller operated the set as a business or whether the acquirer intends to operate the set as a business.
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When evaluating whether a set meets the criteria in paragraphs
805-10-55-5D through 55-5E
, the presence of more than an insignificant amount of goodwill may be an indicator that the acquired process is substantive and, therefore, the acquired set is a business. However, a business need not have goodwill.
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Paragraph 805-10-25-5 provides that the guidance in the General Subsections of Subtopic 810-10 related to determining the existence of a controlling financial interest should be used to identify the acquirer in a business combination, except when a variable interest entity (VIE) is acquired. If a business combination has occurred but applying that guidance does not clearly indicate which of the combining entities is the acquirer, paragraph 805-10-25-5 requires the factors in paragraphs
805-10-55-11 through 55-15
to be considered in making that determination.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
805-10-65-5 Paragraph 805-10-25-5 provides that the guidance in the General Subsections of Subtopic 810-10 related to determining the existence of a controlling financial interest should be used to identify the acquirer in a business combination, except when a variable interest entity (VIE) is acquired. If a business combination has occurred but applying that guidance does not clearly indicate which of the combining entities is the acquirer, paragraph 805-10-25-5 requires the factors in paragraphs
805-10-55-11 through 55-15
to be considered in making that determination.For a business combination that is effected primarily by exchanging equity interests in which a VIE is acquired, the factors in paragraphs
805-10-55-12 through 55-15
shall be considered in determining which entity is the accounting acquirer. For a business combination that is not effected primarily by exchanging equity interests in which a VIE is acquired, the primary beneficiary of that entity is the accounting acquirer.
","snippet":"Paragraph 805-10-25-5 provides that the guidance in the General Subsections of Subtopic 810-10 related to determining the existence of a controlling financial interest should be used to identify the acquirer in a busines…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d60d8c73e7e4b3b4c4059921eb280a29a47d2f36846235dce3a7c6238c406c8b","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-11","para":"55-11","html":"
In a business combination effected primarily by transferring cash or other assets or by incurring liabilities, the acquirer usually is the entity that transfers the cash or other assets or incurs the liabilities.
","snippet":"In a business combination effected primarily by transferring cash or other assets or by incurring liabilities, the acquirer usually is the entity that transfers the cash or other assets or incurs the liabilities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4577a14079a3e880fd5cd7c93b4d6dbe970a704d412b5e85f91ba70814e3bd4e","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-12","para":"55-12","html":"
In a business combination effected primarily by exchanging equity interests, the acquirer usually is the entity that issues its equity interests. However, in some business combinations, commonly called reverse acquisitions, the issuing entity is the acquiree. Subtopic 805-40 provides guidance on accounting for reverse acquisitions. Other pertinent facts and circumstances also shall be considered in identifying the acquirer in a business combination effected by exchanging equity interests, including the following:
  1. a
    The relative voting rights in the combined entity after the business combination. The acquirer usually is the combining entity whose owners as a group retain or receive the largest portion of the voting rights in the combined entity. In determining which group of owners retains or receives the largest portion of the voting rights, an entity shall consider the existence of any unusual or special voting arrangements and options, warrants, or convertible securities.
  2. b
    The existence of a large minority voting interest in the combined entity if no other owner or organized group of owners has a significant voting interest. The acquirer usually is the combining entity whose single owner or organized group of owners holds the largest minority voting interest in the combined entity.
  3. c
    The composition of the governing body of the combined entity. The acquirer usually is the combining entity whose owners have the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity.
  4. d
    The composition of the senior management of the combined entity. The acquirer usually is the combining entity whose former management dominates the management of the combined entity.
  5. e
    The terms of the exchange of equity interests. The acquirer usually is the combining entity that pays a premium over the precombination fair value of the equity interests of the other combining entity or entities.
","snippet":"In a business combination effected primarily by exchanging equity interests, the acquirer usually is the entity that issues its equity interests. However, in some business combinations, commonly called reverse acquisitio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e81fe03507f795a1d49a97d06f784d0352d8fb171a0c6d67be6f394d16e97b2","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-13","para":"55-13","html":"
The acquirer usually is the combining entity whose relative size (measured in, for example, assets, revenues, or earnings) is significantly larger than that of the other combining entity or entities.
","snippet":"The acquirer usually is the combining entity whose relative size (measured in, for example, assets, revenues, or earnings) is significantly larger than that of the other combining entity or entities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e99db5c2e8649e62b0beb4356e2e18e556c12114de602b6120f962e7d53720d0","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-14","para":"55-14","html":"
In a business combination involving more than two entities, determining the acquirer shall include a consideration of, among other things, which of the combining entities initiated the combination, as well as the relative size of the combining entities, as discussed in paragraph 805-10-55-13.
","snippet":"In a business combination involving more than two entities, determining the acquirer shall include a consideration of, among other things, which of the combining entities initiated the combination, as well as the relativ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fbc1958cfa617998a37bcf77759401cad6650325bec60e2cbf1edc62e7d5a215","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-15","para":"55-15","html":"
A new entity formed to effect a business combination is not necessarily the acquirer. If a new entity is formed to issue equity interests to effect a business combination, one of the combining entities that existed before the business combination shall be identified as the acquirer by applying the guidance in paragraphs
805-10-55-10 through 55-14
. In contrast, a new entity that transfers cash or other assets or incurs liabilities as consideration may be the acquirer.
","snippet":"A new entity formed to effect a business combination is not necessarily the acquirer. If a new entity is formed to issue equity interests to effect a business combination, one of the combining entities that existed befor…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ce108665179623d090706f1410b94d7d9dc69f432379f7f9c8604b91ae1e70ff","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-16","para":"55-16","html":"
Paragraphs
805-10-25-14 through 25-19
and
805-10-30-2 through 30-3
discuss requirements related to the measurement period in a business combination. If the initial accounting for a business combination is incomplete at the end of the financial reporting period in which the combination occurs, paragraph 805-10-25-13 requires that the acquirer recognize in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the acquirer recognizes adjustments to the provisional amounts needed to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Paragraph 805-10-25-17 requires the acquirer to recognize such adjustments with a corresponding adjustment to goodwill in the reporting period the adjustments are determined. The effects of adjustments to provisional amounts to periods after the acquisition date are included in the earnings of the adjustment period.
","snippet":"Paragraphs 805-10-25-14 through 25-19 and 805-10-30-2 through 30-3 discuss requirements related to the measurement period in a business combination. If the initial accounting for a business combination is incomplete at t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c03d79f9693f17468cd3768aa2dc0352028788ff40db5ad163f926b74adb3de","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-17","para":"55-17","html":"
Example 1 (see paragraph 805-10-55-27) illustrates measurement period guidance.
","snippet":"Example 1 (see paragraph 805-10-55-27) illustrates measurement period guidance.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cd7262089a146484d5ca3554a72cde0ef783eb101257d9d6fdaa24e4e610758c","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-18","para":"55-18","html":"
Paragraphs
805-10-25-20 through 25-22
establish the requirements to identify amounts that are not part of the business combination. The acquirer should consider the following factors, which are neither mutually exclusive nor individually conclusive, to determine whether a transaction is part of the exchange for the acquiree or whether the transaction is separate from the business combination:
  1. a
    The reasons for the transaction. Understanding the reasons why the parties to the combination (the acquirer, the acquiree, and their owners, directors, managers, and their agents) entered into a particular transaction or arrangement may provide insight into whether it is part of the consideration transferred and the assets acquired or liabilities assumed. For example, if a transaction is arranged primarily for the benefit of the acquirer or the combined entity rather than primarily for the benefit of the acquiree or its former owners before the combination, that portion of the transaction price paid (and any related assets or liabilities) is less likely to be part of the exchange for the acquiree. Accordingly, the acquirer would account for that portion separately from the business combination.
  2. b
    Who initiated the transaction. Understanding who initiated the transaction may also provide insight into whether it is part of the exchange for the acquiree. For example, a transaction or other event that is initiated by the acquirer may be entered into for the purpose of providing future economic benefits to the acquirer or combined entity with little or no benefit received by the acquiree or its former owners before the combination. On the other hand, a transaction or arrangement initiated by the acquiree or its former owners is less likely to be for the benefit of the acquirer or the combined entity and more likely to be part of the business combination transaction.
  3. c
    The timing of the transaction. The timing of the transaction may also provide insight into whether it is part of the exchange for the acquiree. For example, a transaction between the acquirer and the acquiree that takes place during the negotiations of the terms of a business combination may have been entered into in contemplation of the business combination to provide future economic benefits to the acquirer or the combined entity. If so, the acquiree or its former owners before the business combination are likely to receive little or no benefit from the transaction except for benefits they receive as part of the combined entity.
","snippet":"Paragraphs 805-10-25-20 through 25-22 establish the requirements to identify amounts that are not part of the business combination. The acquirer should consider the following factors, which are neither mutually exclusive…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0086dd4ed089d525a1cf0695bf1cdf08d99836ac4cd57db798478dc1921e7084","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-19","para":"55-19","html":"
The following guidance addresses specific transactions referred to in paragraph 805-10-25-21 that are not to be included in applying the acquisition method:
  1. a
    Effective settlement of a preexisting relationship between the acquirer and acquiree in a business combination
  2. b
    Arrangements for contingent payments to employees or selling shareholders.
","snippet":"The following guidance addresses specific transactions referred to in paragraph 805-10-25-21 that are not to be included in applying the acquisition method:\n(a) Effective settlement of a preexisting relationship between …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5c62786aedb7d92f3053b164111fe96248000684e5dc36455df2020f91990f72","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-20","para":"55-20","html":"
The acquirer and acquiree may have a relationship that existed before they contemplated the business combination, referred to here as a preexisting relationship. A preexisting relationship between the acquirer and acquiree may be contractual (for example, vendor and customer or licensor and licensee) or noncontractual (for example, plaintiff and defendant).
","snippet":"The acquirer and acquiree may have a relationship that existed before they contemplated the business combination, referred to here as a preexisting relationship. A preexisting relationship between the acquirer and acquir…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6f6c9155e1b09135ebfb1640e01db157bd0c589d5eb9445231ac141cd883af90","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-21","para":"55-21","html":"
If the business combination in effect settles a preexisting relationship, the acquirer recognizes a gain or loss, measured as follows:
  1. a
    For a preexisting noncontractual relationship, such as a lawsuit, fair value
  2. b
    For a preexisting contractual relationship, the lesser of the following:
    1. 1
      The amount by which the contract is favorable or unfavorable from the perspective of the acquirer when compared with pricing for current market transactions for the same or similar items. An unfavorable contract is a contract that is unfavorable in terms of current market terms. It is not necessarily a loss contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.
    2. 2
      The amount of any stated settlement provisions in the contract available to the counterparty to whom the contract is unfavorable. If this amount is less than the amount in (b)(1), the difference is included as part of the business combination accounting.
","snippet":"If the business combination in effect settles a preexisting relationship, the acquirer recognizes a gain or loss, measured as follows:\n(a) For a preexisting noncontractual relationship, such as a lawsuit, fair value\n(b) …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:80d9c712604716ddee3a9569dc3a31a1223d2cf59e6873fb6944b6a7a896e3bc","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-22","para":"55-22","html":"
Examples 2 and 3 (see paragraphs
805-10-55-30 through 55-33
) illustrate the accounting for the effective settlement of a preexisting relationship as a result of a business combination. As indicated in Example 3 (see paragraph 805-10-55-33), the amount of gain or loss recognized may depend in part on whether the acquirer had previously recognized a related asset or liability, and the reported gain or loss therefore may differ from the amount calculated by applying paragraph 805-10-55-21.
","snippet":"Examples 2 and 3 (see paragraphs 805-10-55-30 through 55-33) illustrate the accounting for the effective settlement of a preexisting relationship as a result of a business combination. As indicated in Example 3 (see para…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2cec1cb223fbea05935d8646f86968a1623c543d181e61b513b80d7fa351ed26","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-23","para":"55-23","html":"
A preexisting relationship may be a contract that the acquirer recognizes as a reacquired right in accordance with paragraph 805-20-25-14. If the contract includes terms that are favorable or unfavorable when compared with pricing for current market transactions for the same or similar items, the acquirer recognizes, separately from the business combination, a gain or loss for the effective settlement of the contract, measured in accordance with paragraph 805-10-55-21.
","snippet":"A preexisting relationship may be a contract that the acquirer recognizes as a reacquired right in accordance with paragraph 805-20-25-14. If the contract includes terms that are favorable or unfavorable when compared wi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c1f688afaedf79f3908c43332493b441cb9c6498031cb18e77f7961b74fdc26","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-24","para":"55-24","html":"
Whether arrangements for contingent payments to employees or selling shareholders are contingent consideration in the business combination or are separate transactions depends on the nature of the arrangements. Understanding the reasons why the acquisition agreement includes a provision for contingent payments, who initiated the arrangement, and when the parties entered into the arrangement may be helpful in assessing the nature of the arrangement.
","snippet":"Whether arrangements for contingent payments to employees or selling shareholders are contingent consideration in the business combination or are separate transactions depends on the nature of the arrangements. Understan…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b6c1e4c57de13762e30a68428b18dfc374cbaffb18b58c7dafc236d14b4836e","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-25","para":"55-25","html":"
If it is not clear whether an arrangement for payments to employees or selling shareholders is part of the exchange for the acquiree or is a transaction separate from the business combination, the acquirer should consider the following indicators:
  1. a
    Continuing employment. The terms of continuing employment by the selling shareholders who become key employees may be an indicator of the substance of a contingent consideration arrangement. The relevant terms of continuing employment may be included in an employment agreement, acquisition agreement, or some other document. A contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is compensation for postcombination services. Arrangements in which the contingent payments are not affected by employment termination may indicate that the contingent payments are additional consideration rather than compensation.
  2. b
    Duration of continuing employment. If the period of required employment coincides with or is longer than the contingent payment period, that fact may indicate that the contingent payments are, in substance, compensation.
  3. c
    Level of compensation. Situations in which employee compensation other than the contingent payments is at a reasonable level in comparison to that of other key employees in the combined entity may indicate that the contingent payments are additional consideration rather than compensation.
  4. d
    Incremental payments to employees. If selling shareholders who do not become employees receive lower contingent payments on a per-share basis than the selling shareholders who become employees of the combined entity, that fact may indicate that the incremental amount of contingent payments to the selling shareholders who become employees is compensation.
  5. e
    Number of shares owned. The relative number of shares owned by the selling shareholders who remain as key employees may be an indicator of the substance of the contingent consideration arrangement. For example, if the selling shareholders who owned substantially all of the shares in the acquiree continue as key employees, that fact may indicate that the arrangement is, in substance, a profit-sharing arrangement intended to provide compensation for postcombination services. Alternatively, if selling shareholders who continue as key employees owned only a small number of shares of the acquiree and all selling shareholders receive the same amount of contingent consideration on a per-share basis, that fact may indicate that the contingent payments are additional consideration. The preacquisition ownership interests held by parties related to selling shareholders who continue as key employees, such as family members, also should be considered.
  6. f
    Linkage to the valuation. If the initial consideration transferred at the acquisition date is based on the low end of a range established in the valuation of the acquiree and the contingent formula relates to that valuation approach, that fact may suggest that the contingent payments are additional consideration. Alternatively, if the contingent payment formula is consistent with prior profit-sharing arrangements, that fact may suggest that the substance of the arrangement is to provide compensation.
  7. g
    Formula for determining consideration. The formula used to determine the contingent payment may be helpful in assessing the substance of the arrangement. For example, if a contingent payment is determined on the basis of a multiple of earnings, that might suggest that the obligation is contingent consideration in the business combination and that the formula is intended to establish or verify the fair value of the acquiree. In contrast, a contingent payment that is a specified percentage of earnings might suggest that the obligation to employees is a profit-sharing arrangement to compensate employees for services rendered.
  8. h
    Other agreements and issues. The terms of other arrangements with selling shareholders (such as noncompete agreements, executory contracts, consulting contracts, and property lease agreements) and the income tax treatment of contingent payments may indicate that contingent payments are attributable to something other than consideration for the acquiree. For example, in connection with the acquisition, the acquirer might enter into a property lease arrangement with a significant selling shareholder. If the lease payments specified in the lease contract are significantly below market, some or all of the contingent payments to the lessor (the selling shareholder) required by a separate arrangement for contingent payments might be, in substance, payments for the use of the leased property that the acquirer should recognize separately in its postcombination financial statements. In contrast, if the lease contract specifies lease payments that are consistent with market terms for the leased property, the arrangement for contingent payments to the selling shareholder may be contingent consideration in the business combination.
","snippet":"If it is not clear whether an arrangement for payments to employees or selling shareholders is part of the exchange for the acquiree or is a transaction separate from the business combination, the acquirer should conside…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b08f915dea7f863f92648513abaa8af700411c6572dc3acf31c6daf7c885e1d6","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-26","para":"55-26","html":"
Example 4 (see paragraph 805-10-55-34) illustrates guidance relating to contingent payments made to an employee in a business combination.
","snippet":"Example 4 (see paragraph 805-10-55-34) illustrates guidance relating to contingent payments made to an employee in a business combination.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51e43078d145471d53a0f4c2ad07dbcb9b2d1f3511359c9f434f45ea1aa9b89b","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d47147cada303f8e59e3899559b46085e89bed0ed11a5a8071668b357ac67d6f","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"805-10-55-27","para":"55-27","html":"
This Example illustrates the measurement period guidance in paragraph 805-10-55-16. Acquirer acquires Target on September 30, 20X7. Acquirer seeks an independent appraisal for an item of property, plant, and equipment acquired in the combination, and the appraisal was not complete by the time Acquirer issued its financial statements for the year ended December 31, 20X7. In its 20X7 annual financial statements, Acquirer recognized a provisional fair value for the asset of $30,000. At the acquisition date, the item of property, plant, and equipment had a remaining useful life of five years. Six months after the acquisition date, Acquirer received the independent appraisal, which estimated the asset's acquisition-date fair value as $40,000.
","snippet":"This Example illustrates the measurement period guidance in paragraph 805-10-55-16. Acquirer acquires Target on September 30, 20X7. Acquirer seeks an independent appraisal for an item of property, plant, and equipment ac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ff497d703572e1b117bb3c135f44c292f286aedf32fe336868e4f5a225183ba7","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-28","para":"55-28","html":"
In its interim financial statements for the quarter ended March 31, 20X8, Acquirer adjusts the provisional amounts recorded and the related effects on that period's earnings as follows:
  1. a
    The carrying amount of property, plant, and equipment as of March 31, 20X8, is increased by $9,000. That adjustment is measured as the fair value adjustment at the acquisition date of $10,000 less the additional depreciation that would have been recognized had the asset's fair value at the acquisition date been recognized from that date ($1,000 for 6 months' depreciation).
  2. b
    The carrying amount of goodwill as of March 31, 20X8, is decreased by $10,000.
  3. c
    Depreciation expense for the period ended March 31, 20X8, is increased by $1,000 to reflect the effect on earnings as a result of the change to the provisional amount recognized.
","snippet":"In its interim financial statements for the quarter ended March 31, 20X8, Acquirer adjusts the provisional amounts recorded and the related effects on that period's earnings as follows:\n(a) The carrying amount of propert…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:79357b39c56a7800a6bdc55de4035541cf061b26032c0917b9fbf3dd71fac8bf","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-29","para":"55-29","html":"
In accordance with paragraph 805-20-50-4A, Acquirer discloses both of the following:
  1. a
    In its 20X7 financial statements, that the initial accounting for the business combination has not been completed because the appraisal of property, plant, and equipment has not yet been received
  2. b
    In its March 31, 20X8 financial statements, the amounts and explanations of the adjustments to the provisional values recognized during the current reporting period. Therefore, Acquirer discloses that the increase to the fair value of the item of property, plant, and equipment was $10,000, with a corresponding decrease to goodwill. Additionally, the change to the provisional amount resulted in an increase in depreciation expense and accumulated depreciation of $1,000, of which $500 relates to the previous quarter.
","snippet":"In accordance with paragraph 805-20-50-4A, Acquirer discloses both of the following:\n(a) In its 20X7 financial statements, that the initial accounting for the business combination has not been completed because the appra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:69c64eaeca545b0a0e20389a205fd5f49875925701c83664a32c6171f494cdf9","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-30","para":"55-30","html":"
This Example illustrates the guidance in paragraphs
805-10-55-20 through 55-21
. Acquirer purchases electronic components from Target under a five-year supply contract at fixed rates. Currently, the fixed rates are higher than rates at which Acquirer could purchase similar electronic components from another supplier. The supply contract allows Acquirer to terminate the contract before the end of the initial 5-year term only by paying a $6 million penalty. With 3 years remaining under the supply contract, Acquirer pays $50 million to acquire Target, which is the fair value of Target based on what other market participants would be willing to pay.
","snippet":"This Example illustrates the guidance in paragraphs 805-10-55-20 through 55-21. Acquirer purchases electronic components from Target under a five-year supply contract at fixed rates. Currently, the fixed rates are higher…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ef5c6858bdd597e23bb3b7490297bfde2cca70c7051e0cfa20e8f353360cabab","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-31","para":"55-31","html":"
Included in the total fair value of Target is $8 million related to the fair value of the supply contract with Acquirer. The $8 million represents a $3 million component that is at-market because the pricing is comparable to pricing for current market transactions for the same or similar items (selling effort, customer relationships, and so forth) and a $5 million component for pricing that is unfavorable to Acquirer because it exceeds the price of current market transactions for similar items. Target has no other identifiable assets or liabilities related to the supply contract, and Acquirer has not recognized any assets or liabilities related to the supply contract before the business combination.
","snippet":"Included in the total fair value of Target is $8 million related to the fair value of the supply contract with Acquirer. The $8 million represents a $3 million component that is at-market because the pricing is comparabl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1c833e8fe61de14d963cd602576f552bfe7ace07da821eda4d9cd09667840b0b","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-32","para":"55-32","html":"
In this Example, Acquirer recognizes a loss of $5 million (the lesser of the $6 million stated settlement amount and the amount by which the contract is unfavorable to the acquirer) separately from the business combination. The $3 million at-market component of the contract is part of goodwill.
","snippet":"In this Example, Acquirer recognizes a loss of $5 million (the lesser of the $6 million stated settlement amount and the amount by which the contract is unfavorable to the acquirer) separately from the business combinati…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bcddfa8910e63efecc778e3e7e9b608309f0699311f2b8f729d9b061ae6cd82a","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-33","para":"55-33","html":"
This Example illustrates the guidance in paragraphs
805-10-55-20 through 55-21
. Whether Acquirer had previously recognized an amount in its financial statements related to a preexisting relationship will affect the amount recognized as a gain or loss for the effective settlement of the relationship. In Example 2 (see paragraph 805-10-55-30), generally accepted accounting principles (GAAP) might have required Acquirer to recognize a $6 million liability for the supply contract before the business combination. In that situation, Acquirer recognizes a $1 million settlement gain on the contract in earnings at the acquisition date (the $5 million measured loss on the contract less the $6 million loss previously recognized). In other words, Acquirer has in effect settled a recognized liability of $6 million for $5 million, resulting in a gain of $1 million.
","snippet":"This Example illustrates the guidance in paragraphs 805-10-55-20 through 55-21. Whether Acquirer had previously recognized an amount in its financial statements related to a preexisting relationship will affect the amoun…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dc16ecf6726c4ec72bbd05e0e173e10fa8172d6334c53372372d8820aa7cfb42","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-34","para":"55-34","html":"
This Example illustrates the guidance in paragraphs
805-10-55-24 through 55-25
relating to contingent payments to employees in a business combination. Target hired a candidate as its new chief executive officer under a 10-year contract. The contract required Target to pay the candidate $5 million if Target is acquired before the contract expires. Acquirer acquires Target eight years later. The chief executive officer was still employed at the acquisition date and will receive the additional payment under the existing contract.
","snippet":"This Example illustrates the guidance in paragraphs 805-10-55-24 through 55-25 relating to contingent payments to employees in a business combination. Target hired a candidate as its new chief executive officer under a 1…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba0f26c1b094629d92b61ebea67e8d7191e800559c20ebacc7dc98cca4cff5ea","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-35","para":"55-35","html":"
In this Example, Target entered into the employment agreement before the negotiations of the combination began, and the purpose of the agreement was to obtain the services of the chief executive officer. Thus, there is no evidence that the agreement was arranged primarily to provide benefits to Acquirer or the combined entity. Therefore, the liability to pay $5 million is included in the application of the acquisition method.
","snippet":"In this Example, Target entered into the employment agreement before the negotiations of the combination began, and the purpose of the agreement was to obtain the services of the chief executive officer. Thus, there is n…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91c18127886d6037fdc19cc49d4c6a9f9258ab9796731eedf2ae417312c4a9fb","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-36","para":"55-36","html":"
In other circumstances, Target might enter into a similar agreement with the chief executive officer at the suggestion of Acquirer during the negotiations for the business combination. If so, the primary purpose of the agreement might be to provide severance pay to the chief executive officer, and the agreement may primarily benefit Acquirer or the combined entity rather than Target or its former owners. In that situation, Acquirer accounts for the liability to pay the chief executive officer in its postcombination financial statements separately from application of the acquisition method.
","snippet":"In other circumstances, Target might enter into a similar agreement with the chief executive officer at the suggestion of Acquirer during the negotiations for the business combination. If so, the primary purpose of the a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9527bd654ee5afe07cd5276baccb69ae7cea98b59df51c68b77a7e2b3aeda7f","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-37","para":"55-37","html":"
This Example illustrates some of the disclosure requirements established in the several Subtopics of this Topic; it is not based on an actual transaction. The Example assumes that Acquirer is a public entity and that Target is a private entity. The illustration presents the disclosures in a tabular format that refers to the specific disclosure requirements illustrated. An actual note to financial statements might present many of the disclosures illustrated in a simple narrative format.
","snippet":"This Example illustrates some of the disclosure requirements established in the several Subtopics of this Topic; it is not based on an actual transaction. The Example assumes that Acquirer is a public entity and that Tar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b633ad35cecd0de6699e7b3ba7462fd200eac61e6e17629431893de98950ee12","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-38","para":"55-38","html":"
Paragraph 805-10-50-2(a) through (d)
","snippet":"Paragraph 805-10-50-2(a) through (d)\nOn June 30, 20X0, Acquirer acquired 15 percent of the outstanding common shares of Target. On June 30, 20X2, Acquirer acquired 60 percent of the outstanding common shares of Target. T…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dd1c6ed5356153b4e3d9bf39c1f2800478b2138d9140bf724f8bc684359b1b06","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-39","para":"55-39","html":"
Paragraph 805-30-50-1(a) and 805-30-50-1(e)
","snippet":"Paragraph 805-30-50-1(a) and 805-30-50-1(e)\nThe goodwill of $2,500 arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of Acquirer and Target. All …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:45c5c7299c4862ccb9df25137a9a0ddc65a952464391c03b814fa60415535839","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-40","para":"55-40","html":"
Paragraph 805-30-50-1(d)
","snippet":"Paragraph 805-30-50-1(d)\nNone of the goodwill recognized is expected to be deductible for income tax purposes.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8d7b09374dbd67206cba278a33a7800a267769cf48e010a1d785193bd022286","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-41","para":"55-41","html":"
Paragraphs 805-10-50-2, 805-20-50-1, and 805-30-50-1
","snippet":"Paragraphs 805-10-50-2, 805-20-50-1, and 805-30-50-1\nThe following table summarizes the consideration paid for Target and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date, as …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5720d2d8ca6680865444204ef127c907bee95b1297e975aaa24d0271dd73ac8e","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-42","para":"55-42","html":"
Paragraph 805-30-50-1(b)(4)
","snippet":"Paragraph 805-30-50-1(b)(4)\nThe fair value of the 100,000 common shares issued as part of the consideration paid for Target ($4,000) was determined on the basis of the closing market price of Acquirer's common shares on …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:02888dc462ec033d8c4caaa143ec843288b536c9913cd49022058e3ddc423c46","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-43","para":"55-43","html":"
Paragraph 805-30-50-1(b)(3) and 805-30-50-1(c), and paragraph 805-30-50-4(a)
","snippet":"Paragraph 805-30-50-1(b)(3) and 805-30-50-1(c), and paragraph 805-30-50-4(a)\nThe contingent consideration arrangement requires Acquirer to pay the former owners of Target 5 percent of the revenues of an unconsolidated eq…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88914d7a0f2a4ad20ecf878b723486015c71aa0275bba17aa8e3cc0d6b426797","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-44","para":"55-44","html":"
Paragraph 805-20-50-1(b)
","snippet":"Paragraph 805-20-50-1(b)\nThe fair value of the financial assets acquired includes receivables under sales-type leases or direct financing leases of data networking equipment with a fair value of $2,000. The gross amount …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:93fd8dd43376b9ba5d642cc25a98f05b28716efb722bf746cee4ca1df0270b4e","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-45","para":"55-45","html":"
Paragraph 805-20-50-4A
","snippet":"Paragraph 805-20-50-4A\nThe fair value of the acquired identifiable intangible assets of $3,300 is provisional pending receipt of the final valuations for those assets.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ec3e79c9e6615b33b650844d9e239744386e987f58f7cd1bd6b2c6b3ee81c496","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-46","para":"55-46","html":"
Paragraph 805-20-50-1(d)
","snippet":"Paragraph 805-20-50-1(d)\nA liability of $1,000 has been recognized at fair value for expected warranty claims on products sold by Target during the last 3 years. Acquirer expects that the majority of this expenditure wil…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5154f7e96bfd5276914a2565471e618d44b61d61b49a15d19bc859b53fceb2d1","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-47","para":"55-47","html":"
Paragraph 805-20-50-1(e)
","snippet":"Paragraph 805-20-50-1(e)\nThe fair value of the noncontrolling interest in Target, a private entity, was estimated by applying the income approach and a market approach. This fair value measurement is based on significant…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3d6e46ada200da5df7a942a8d90efb00f82d031f1659d0d3c40b33d500e6cb17","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-48","para":"55-48","html":"
Paragraph 805-10-50-2(g)(2)
","snippet":"Paragraph 805-10-50-2(g)(2)\nAcquirer recognized a gain of $500 as a result of remeasuring to fair value its 15 percent equity interest in Target held before the business combination. The gain is included in other income …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a8f05af1c014c1713d5f822240690095930e50000facc972c28d35c71c95f9f","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-49","para":"55-49","html":"
Paragraph 805-10-50-2(h)(1) through (h)(3)
","snippet":"Paragraph 805-10-50-2(h)(1) through (h)(3)\nThe amounts of Target's revenue and earnings included in Acquirer's consolidated income statement for the year ended December 31, 20X2, and the revenue and earnings of the combi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7e395d3ad4e82f3d36cf82128bffa3df42f159bc55738c0809bc8005ddbb16ea","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-50","para":"55-50","html":"
Paragraph 805-10-50-2(h)(4)
","snippet":"Paragraph 805-10-50-2(h)(4)\n20X2 supplemental pro forma earnings were adjusted to exclude $1,250 of acquisition-related costs incurred in 20X2 and $650 of nonrecurring expense related to the fair value adjustment to acqu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78f9a1b743d6ae7eeb5b814c39e0d3a28602e62c1dd63f7ff7b09716b0f76b5d","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-51","para":"55-51","html":"
The Examples in paragraphs
805-10-55-52 through 55-96
illustrate the guidance in paragraphs
805-10-55-4 through 55-6
and
805-10-55-8 through 55-9
on the definition of a business. In each of the Examples, the first step of the analysis is the evaluation of the threshold in paragraphs
805-10-55-5A through 55-5C
. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If that threshold is not met, an entity should evaluate whether the set includes an input and a substantive process that together significantly contribute to the ability to create outputs. To determine whether both an input and a substantive process are included in the set, an entity should complete its evaluation using the framework (guidance in paragraphs
805-10-55-5D through 55-6
and
805-10-55-8 through 55-9
).
","snippet":"The Examples in paragraphs 805-10-55-52 through 55-96 illustrate the guidance in paragraphs 805-10-55-4 through 55-6 and 805-10-55-8 through 55-9 on the definition of a business. In each of the Examples, the first step o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f379d3d3863d69fa0d231f1213800d3a9c5a57848c28b5aecaa73054c51237b","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-52","para":"55-52","html":"
ABC acquires, renovates, leases, sells, and manages real estate properties. ABC acquires a portfolio of 10 single-family homes that each have in-place leases. The only elements included in the acquired set are the 10 single-family homes and the 10 in-place leases. Each single-family home includes the land, building, and property improvements. Each home has a different floor plan, square footage, lot, and interior design. No employees or other assets are acquired.
","snippet":"ABC acquires, renovates, leases, sells, and manages real estate properties. ABC acquires a portfolio of 10 single-family homes that each have in-place leases. The only elements included in the acquired set are the 10 sin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3a37e0d839e9b60e27c27d22dbb4be4796e8839db6c97ae0eabe0541dfc54fb3","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-53","para":"55-53","html":"
ABC first considers the threshold guidance in paragraphs
805-10-55-5A through 55-5C
. ABC concludes that the land, building, property improvements, and in-place leases at each property can be considered a single asset in accordance with paragraph 805-10-55-5B. That is, the building and property improvements are attached to the land and cannot be removed without incurring significant cost. Additionally, the in-place lease is an intangible asset that should be combined with the related real estate and considered a single asset.
","snippet":"ABC first considers the threshold guidance in paragraphs 805-10-55-5A through 55-5C. ABC concludes that the land, building, property improvements, and in-place leases at each property can be considered a single asset in …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e5b802c6e226d4c78ca38486bb34a86ec6d2fb50552e4750a32dcd20f506d804","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-54","para":"55-54","html":"
ABC also concludes that the 10 single assets (the combined land, building, in-place lease intangible, and property improvements) are similar. Each home has a different floor plan; however, the nature of the assets (all single-family homes) are similar. ABC also concludes that the risks associated with managing and creating outputs are not significantly different. That is, the risks associated with operating the properties and tenant acquisition and management are not significantly different because the types of homes and class of customers are not significantly different. Similarly, the risks associated with operating in the real estate market of the homes acquired are not significantly different. Consequently, ABC concludes that substantially all of the fair value of the gross assets acquired is concentrated in the group of similar identifiable assets; thus, the set is not a business.
","snippet":"ABC also concludes that the 10 single assets (the combined land, building, in-place lease intangible, and property improvements) are similar. Each home has a different floor plan; however, the nature of the assets (all s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a5ed41eb8b52dac618e8df8ea5ee2c94c0a880741497029e9d0fdfb57735e9d","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-55","para":"55-55","html":"
Assume the same facts as in Scenario 1 except that ABC also acquires an office park with six 10-story office buildings leased to maximum occupancy of which all have significant fair value. ABC also acquires the vendor contracts for outsourced cleaning, security, and maintenance. Seller's employees that perform leasing (sales, underwriting, and so forth), tenant management, financing, and other strategic management processes are not included in the set. ABC plans to replace the property management and employees with its own internal resources.
","snippet":"Assume the same facts as in Scenario 1 except that ABC also acquires an office park with six 10-story office buildings leased to maximum occupancy of which all have significant fair value. ABC also acquires the vendor co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5023de752e60b8ce35ebc78c6b29e1a754cfecaa57b7611280e647bb1de69e74","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-56","para":"55-56","html":"
ABC concludes that the single-family homes and office park are not similar assets. ABC considers the risks associated with operating the assets, obtaining tenants, and tenant management between the single-family homes and office park to be significantly different because the scale of operations and risks associated with the class of customers are significantly different. Therefore, substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets. Thus, ABC must further evaluate whether the set has the minimum requirements to be considered a business.
","snippet":"ABC concludes that the single-family homes and office park are not similar assets. ABC considers the risks associated with operating the assets, obtaining tenants, and tenant management between the single-family homes an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1fc559a562946ce22787f0cfb6b3ab410e1151562a5189f7f8886262f5404344","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-57","para":"55-57","html":"
The set has continuing revenues through the in-place leases and, therefore, has outputs. ABC must consider the criteria in paragraph 805-10-55-5E to determine whether the set includes both an input and a substantive process that together significantly contribute to the ability to create outputs.
","snippet":"The set has continuing revenues through the in-place leases and, therefore, has outputs. ABC must consider the criteria in paragraph 805-10-55-5E to determine whether the set includes both an input and a substantive proc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8695d6faf7f2027af32b074784333435385798031dc3b8949f65d462c56c0fa5","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-58","para":"55-58","html":"
ABC concludes that the criteria in paragraph 805-10-55-5E(a) through (b) are not met because the set does not include employees and the processes performed through the cleaning and security contracts (the only processes acquired) will be considered ancillary or minor in the context of all the processes required to create outputs in the real estate industry. That is, while those outsourcing agreements may be considered to provide an organized workforce that performs cleaning and security processes when applied to the building, the processes performed by the cleaning, security, and maintenance personnel are not considered critical in the context of all the processes required to create outputs.
","snippet":"ABC concludes that the criteria in paragraph 805-10-55-5E(a) through (b) are not met because the set does not include employees and the processes performed through the cleaning and security contracts (the only processes …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d2373b5b4bbee77dbe25ef54499e4cf7abc488e706e392cc33e0013d0c40bc8e","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-59","para":"55-59","html":"
ABC also concludes that the criterion in paragraph 805-10-55-5E(c) is not met because the cleaning and security processes could be easily replaced with little cost, effort, or delay in the ability to continue producing outputs. While the cleaning and security processes are necessary for continued operations of the buildings, these contracts can be replaced quickly with little effect on the ability to continue producing outputs.
","snippet":"ABC also concludes that the criterion in paragraph 805-10-55-5E(c) is not met because the cleaning and security processes could be easily replaced with little cost, effort, or delay in the ability to continue producing o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:544e1feb6da0cb5dba82dc300cc5334d304dc5bb1abb74ce7539b872ccb4c500","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-60","para":"55-60","html":"
ABC concludes that the criterion in paragraph 805-10-55-5E(d) is not met because the cleaning and security contracts are not considered unique or scarce. That is, these types of arrangements are readily accessible in the marketplace.
","snippet":"ABC concludes that the criterion in paragraph 805-10-55-5E(d) is not met because the cleaning and security contracts are not considered unique or scarce. That is, these types of arrangements are readily accessible in the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5fd91b81a9ab0332ec2a774f1d3a8539a02597bfacbd8d2a777d235096178f34","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-61","para":"55-61","html":"
Because none of the criteria were met, ABC concludes that the set does not include both an input and substantive processes that together significantly contribute to the ability to create outputs and, therefore, is not considered a business.
","snippet":"Because none of the criteria were met, ABC concludes that the set does not include both an input and substantive processes that together significantly contribute to the ability to create outputs and, therefore, is not co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f00eb24349316bfc76bc3394206d686c98f7c18d3e16b1bc132a0e5b652aae4f","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-62","para":"55-62","html":"
Assume the same facts as in Scenario 2, except that the set includes the employees responsible for leasing, tenant management, and managing and supervising all operational processes.
","snippet":"Assume the same facts as in Scenario 2, except that the set includes the employees responsible for leasing, tenant management, and managing and supervising all operational processes.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f79131b0d7f3ce4071d484fdb6a90ab69c605dcc1837b88a6fa393113850daa8","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-63","para":"55-63","html":"
The set has continuing revenues through the in-place leases and, therefore, has outputs. ABC must consider the criteria in paragraph 805-10-55-5E to determine whether the set includes both an input and a substantive process that together significantly contribute to the ability to create outputs.
","snippet":"The set has continuing revenues through the in-place leases and, therefore, has outputs. ABC must consider the criteria in paragraph 805-10-55-5E to determine whether the set includes both an input and a substantive proc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d25667902e5d5e58eb1f1b6de2f83e99e1476598393344e24dec828e2991e1b2","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-64","para":"55-64","html":"
ABC determines that the criterion in paragraph 805-10-55-5E(a) is met because the set includes an organized workforce that performs processes that when applied to the acquired inputs in the set (the land, building, and in-place leases) are critical to the ability to continue producing outputs. That is, ABC concludes that the leasing, tenant management, and supervision of the operational processes are critical to the creation of outputs. Because it includes both an input and a substantive process, the set is considered a business.
","snippet":"ABC determines that the criterion in paragraph 805-10-55-5E(a) is met because the set includes an organized workforce that performs processes that when applied to the acquired inputs in the set (the land, building, and i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77d6dc13ce6d7e61f49c2cfecff44e6665908dec9334827137b09d9204fff0fb","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-65","para":"55-65","html":"
Pharma Co. purchases from Biotech a legal entity that contains the rights to a Phase 3 (in the clinical research phase) compound being developed to treat diabetes (the in-process research and development project). Included in the in-process research and development project is the historical know-how, formula protocols, designs, and procedures expected to be needed to complete the related phase of testing. The legal entity also holds an at-market clinical research organization contract and an at-market clinical manufacturing organization contract. No employees, other assets, or other activities are transferred.
","snippet":"Pharma Co. purchases from Biotech a legal entity that contains the rights to a Phase 3 (in the clinical research phase) compound being developed to treat diabetes (the in-process research and development project). Includ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d522daabcfb98d1ff9f4827682d5a3201f65ab8e2e2f4829055767827eae59db","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-66","para":"55-66","html":"
Pharma Co. first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. Pharma Co. concludes that the in-process research and development project is an identifiable intangible asset that would be accounted for as a single asset in a business combination. Pharma Co. also qualitatively concludes that there is no fair value associated with the clinical research organization contract and the clinical manufacturing organization contract because the services are being provided at market rates and could be provided by multiple vendors in the marketplace. Therefore, all of the consideration in the transaction will be allocated to the in-process research and development project. As such, Pharma Co. concludes that substantially all of the fair value of the gross assets acquired is concentrated in the single in-process research and development asset and the set is not a business.
","snippet":"Pharma Co. first considers the guidance in paragraphs 805-10-55-5A through 55-5C. Pharma Co. concludes that the in-process research and development project is an identifiable intangible asset that would be accounted for …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a3103ae8d58c8b577b73f3dca1ed7a4620347fe11066bdce346971b8c4a47bf0","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-67","para":"55-67","html":"
Pharma Co. purchases from Biotech a legal entity that contains the rights to a Phase 3 compound being developed to treat diabetes (Project 1) and a Phase 3 compound being developed to treat Alzheimer's disease (Project 2). Included with each project are the historical know-how, formula protocols, designs, and procedures expected to be needed to complete the related phase of testing. The legal entity also holds at-market clinical research organization contracts and at-market clinical manufacturing organization contracts associated with each project. Assume that Project 1 and Project 2 have equal fair value. No employees, other assets, or other activities are transferred.
","snippet":"Pharma Co. purchases from Biotech a legal entity that contains the rights to a Phase 3 compound being developed to treat diabetes (Project 1) and a Phase 3 compound being developed to treat Alzheimer's disease (Project 2…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:acfa377c2fc9c37f18b3f95e719d55721f72b4ceee5940a86506461c26dc6b11","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-68","para":"55-68","html":"
Pharma Co. concludes that Project 1 and Project 2 are each separately identifiable intangible assets, both of which would be accounted for as a single asset in a business combination. Pharma Co. then considers whether Project 1 and Project 2 are similar assets. Pharma Co. notes that the nature of the assets is similar in that both Project 1 and Project 2 are in-process research and development assets in the same major asset class. However, Pharma Co. concludes that Project 1 and Project 2 have significantly different risks associated with creating outputs from each asset because each project has different risks associated with developing and marketing the compound to customers. The projects are intended to treat significantly different medical conditions, and each project has a significantly different potential customer base and expected market and regulatory risks associated with the assets. Thus, Pharma Co. concludes that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets and that it must further evaluate whether the set has the minimum requirements to be considered a business.
","snippet":"Pharma Co. concludes that Project 1 and Project 2 are each separately identifiable intangible assets, both of which would be accounted for as a single asset in a business combination. Pharma Co. then considers whether Pr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e759bc7894b1cb03dfe7853e469b6e21ac35aa7cd946a3261339cb7039288e15","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-69","para":"55-69","html":"
Because the set does not have outputs, Pharma Co. evaluates the criteria in paragraph 805-10-55-5D to determine whether the set has both an input and a substantive process that together significantly contribute to the ability to create outputs. Pharma Co. concludes that the criteria are not met because the set does not have employees. As such, Pharma Co. concludes that the set is not a business.
","snippet":"Because the set does not have outputs, Pharma Co. evaluates the criteria in paragraph 805-10-55-5D to determine whether the set has both an input and a substantive process that together significantly contribute to the ab…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ed079f8e403fd3f1791538663d0250b945c00c81b00efd06e8ac7f41bed0250","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-70","para":"55-70","html":"
Pharma Co. buys all of the outstanding shares of Biotech. Biotech's operations include research and development activities on several drug compounds that it is developing (in-process research and development projects). The in-process research and development projects are in different phases of the U.S. Food and Drug Administration approval process and would treat significantly different diseases. The set includes senior management and scientists that have the necessary skills, knowledge, or experience to perform research and development activities. In addition, Biotech has long-lived tangible assets such as a corporate headquarters, a research lab, and lab equipment. Biotech does not yet have a marketable product and, therefore, has not generated revenues. Assume that each research and development project has a significant amount of fair value.
","snippet":"Pharma Co. buys all of the outstanding shares of Biotech. Biotech's operations include research and development activities on several drug compounds that it is developing (in-process research and development projects). T…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8092c2b20982843ad7760ba6c1175b04200a9e8f1fe98cbe7904b1c99cad99e2","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-71","para":"55-71","html":"
Pharma Co. first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. The identifiable assets in the set include multiple in-process research and development projects and tangible assets (the corporate headquarters, the research lab, and the lab equipment). Pharma Co. concludes that the in-process research and development projects are not similar assets because the projects have significantly different risks associated with managing the assets and creating the outputs (that is, because there are significantly different development risks in the different phases of development, market risks related to the different customer base, and potential markets for the compounds). In addition, Pharma Co. concludes that there is fair value associated with the acquired workforce because of the proprietary knowledge of and experience with Biotech's ongoing development projects and the potential for creation of new development projects that the workforce embodies. As such, Pharma Co. concludes that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets and that it must further evaluate whether the set has the minimum requirements to be considered a business.
","snippet":"Pharma Co. first considers the guidance in paragraphs 805-10-55-5A through 55-5C. The identifiable assets in the set include multiple in-process research and development projects and tangible assets (the corporate headqu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ef2f9ddf3f950933fcc87551e8f48b50c94e9edfd74f8ad48a51ec9c7a67178e","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-72","para":"55-72","html":"
Because the set does not have outputs, Pharma Co. evaluates the criteria in paragraph 805-10-55-5D to determine whether the set has both an input and a substantive process that together significantly contribute to the ability to create outputs. Pharma Co. concludes that the criteria are met because the scientists make up an organized workforce that has the necessary skills, knowledge, or experience to perform processes that when applied to the in-process research and development inputs is critical to the ability to develop those inputs into a product that can be provided to a customer. Pharma Co. also determines that there is a more-than-insignificant amount of goodwill (including the fair value associated with the workforce), which is another indicator that the workforce is performing a critical process. Thus, the set includes both inputs and substantive processes and is a business.
","snippet":"Because the set does not have outputs, Pharma Co. evaluates the criteria in paragraph 805-10-55-5D to determine whether the set has both an input and a substantive process that together significantly contribute to the ab…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c6709ee8f3c54a0631d2148b8d0f06938164baa55a97206e64268afe0de10542","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-73","para":"55-73","html":"
Company A is a television broadcaster whose principal business is the ownership and operation of a television station group in the United States through which it broadcasts its proprietary health-care-related programming. Company B owns and operates several television stations in the western United States. Because of a recent merger, Company B must divest itself of a station in Portland, Oregon (KPOR), and agrees to sell the station to Company A.
","snippet":"Company A is a television broadcaster whose principal business is the ownership and operation of a television station group in the United States through which it broadcasts its proprietary health-care-related programming…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d98fdf7e44d87a5d4cb99bf1545c47cca0725dee265915fa65697d832e243f1b","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-74","para":"55-74","html":"
Company A plans to change KPOR's programming format to its proprietary health-care-related programming. Therefore, Company A will receive only the U.S. Federal Communications Commission license, the broadcasting equipment, and the office building. KPOR will be integrated into Company A's operations, with most of the station processes centralized at Company A's corporate headquarters. Company A will not extend offers of employment to any of KPOR's employees or assume any of KPOR's contractual relationships.
","snippet":"Company A plans to change KPOR's programming format to its proprietary health-care-related programming. Therefore, Company A will receive only the U.S. Federal Communications Commission license, the broadcasting equipmen…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51ebf9224a9f0a7147b98f0ffa32fd10259d5ea89622dbec85bc5ef9a834a4ea","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-75","para":"55-75","html":"
Company A first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. The U.S. Federal Communications Commission license is an intangible asset that is recognized and measured separately in a business combination, while the broadcast equipment and building are tangible nonfinancial assets in different major classes. Company A concludes that the broadcast equipment and building are not considered a single asset because the equipment is not attached to the building and can be removed without significant cost or diminution in fair value. Furthermore, none of the assets will be considered similar in accordance with paragraph 805-10-55-5C because the U.S. Federal Communications Commission license cannot be considered similar to tangible assets and the tangible assets are in different major asset classes. Each of the separate identifiable assets has significant fair value. Thus, Company A concludes that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets and that it must further evaluate whether the set has the minimum requirements to be considered a business.
","snippet":"Company A first considers the guidance in paragraphs 805-10-55-5A through 55-5C. The U.S. Federal Communications Commission license is an intangible asset that is recognized and measured separately in a business combinat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2a90c1afd9349e8153d63c829ed27941c0a837a06dfb91375d5a04e98336dca1","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-76","para":"55-76","html":"
The set does not have outputs; therefore, Company A considers the criteria in paragraph 805-10-55-5D to determine whether the set includes both an input and a substantive process that together significantly contribute to the ability to create outputs. The set does not include an organized workforce, so it does not meet the criteria in paragraph 805-10-55-5D. Therefore, the set does not include both an input and a substantive process and is not considered a business.
","snippet":"The set does not have outputs; therefore, Company A considers the criteria in paragraph 805-10-55-5D to determine whether the set includes both an input and a substantive process that together significantly contribute to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:512202501fc14b571da9852aa568acc47d50a386758e31980c5cc14505dede44","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-77","para":"55-77","html":"
Widget Co. manufactures complex equipment and has manufacturing facilities throughout the world. Widget Co. decided to idle a facility in a foreign jurisdiction in a reorganization of its manufacturing footprint and furloughed the assembly line employees.
","snippet":"Widget Co. manufactures complex equipment and has manufacturing facilities throughout the world. Widget Co. decided to idle a facility in a foreign jurisdiction in a reorganization of its manufacturing footprint and furl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4493ada4d6f40ce293ce5f11c08c2c9cd93b3f644746761e61c18772e8df7d9f","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-78","para":"55-78","html":"
Acquirer enters into an agreement to purchase a manufacturing facility and related equipment from Widget Co. To comply with the local labor laws, Acquirer also must assume the furloughed employees.
","snippet":"Acquirer enters into an agreement to purchase a manufacturing facility and related equipment from Widget Co. To comply with the local labor laws, Acquirer also must assume the furloughed employees.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c9f0bee7f442fe4008517e6e0134e3c28aa0a978167fbe3e8ea51fd6ecb25836","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-79","para":"55-79","html":"
The assets acquired include the equipment and facility (land and building) but no intellectual property, inventory, customer relationships, or any other inputs.
","snippet":"The assets acquired include the equipment and facility (land and building) but no intellectual property, inventory, customer relationships, or any other inputs.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f1ebb419ff32587d975df656a771dd318a18d9c5907919958b55e932f494c894","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-80","para":"55-80","html":"
Acquirer first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. Acquirer concludes that the equipment in the facility can be removed without significant cost or diminution in utility or fair value because the equipment is not attached to the building and can be used in many types of manufacturing facilities. Therefore, the equipment and building are not a single asset. Furthermore, the equipment and facility are not considered similar assets because they are different major classes of tangible assets. Acquirer determines that there is significant fair value in both the equipment and the facility and, thus, concludes that it must further evaluate whether the set has the minimum requirements to be considered a business.
","snippet":"Acquirer first considers the guidance in paragraphs 805-10-55-5A through 55-5C. Acquirer concludes that the equipment in the facility can be removed without significant cost or diminution in utility or fair value because…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a09c7e3838ffc213298f9281221e2555b2171629025a8f19d74a8049beb3da56","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-81","para":"55-81","html":"
The set is not currently producing outputs because there is no continuation of revenue before and after the transaction; therefore, Acquirer considers the criteria in paragraph 805-10-55-5D and whether the set includes both employees that form an organized workforce and an input that the workforce could develop or convert into output. The set includes employees that have the necessary skills, knowledge, or experience to use the equipment; however, without intellectual property or other inputs that could be converted into outputs using the equipment, the set does not include both an organized workforce and an input that will meet the criteria in paragraph 805-10-55-5D. That is, the equipment itself cannot be developed or converted into an output by those employees. Therefore, the set is not a business.
","snippet":"The set is not currently producing outputs because there is no continuation of revenue before and after the transaction; therefore, Acquirer considers the criteria in paragraph 805-10-55-5D and whether the set includes b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae9e4a5195b001ea230fdc0e8d3c66648101541ef165fcf13c77d0efde7094fd","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-82","para":"55-82","html":"
Company A is a distributor of food and beverages. Company A enters into an agreement to sublicense the Latin American distribution rights of Yogurt Brand F to Company B, whereby Company B will distribute Yogurt Brand F in Latin America. As part of the agreement, Company A transfers the existing customer contracts in Latin America to Company B and an at-market supply contract with the producer of Yogurt Brand F. Company A retains all of its employees and distribution capabilities.
","snippet":"Company A is a distributor of food and beverages. Company A enters into an agreement to sublicense the Latin American distribution rights of Yogurt Brand F to Company B, whereby Company B will distribute Yogurt Brand F i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f8cd35d0b518fa6945a1b23e9cc731a238ae44619e63043720433ef3b12743c8","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-83","para":"55-83","html":"
Company B first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. The identifiable assets that could be recognized in a business combination include the license to distribute Yogurt Brand F, customer contracts, and the supply agreement. Company B concludes that the license and customer contracts will have fair value assigned to them. Company B concludes that neither asset represents substantially all of the fair value of the gross assets. Company B then considers whether the license and customer contracts are a group of similar intangible assets. Because the license and customer contracts are in different major classes of identifiable intangible assets, they are not considered similar assets. Therefore, substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets, and Company B must evaluate whether the set has both an input and a substantive process.
","snippet":"Company B first considers the guidance in paragraphs 805-10-55-5A through 55-5C. The identifiable assets that could be recognized in a business combination include the license to distribute Yogurt Brand F, customer contr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a2da1c57f28c188d2fb95294e5d289a34d41436a3d72662b59126e67d6279325","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-84","para":"55-84","html":"
The set has outputs through the continuation of revenues with customers in Latin America. As such, Company B must evaluate the criteria in paragraph 805-10-55-5E to determine whether the set includes an input and a substantive process that together significantly contribute to the ability to create outputs. Company B considers whether the acquired contracts are providing access to an organized workforce that performs a substantive process. However, because the contracts are not providing a service that applies a process to another acquired input, Company B concludes that the substance of the contracts are only that of acquiring inputs. The set is not a business because:
  1. a
    It does not include an organized workforce that could meet the criteria in paragraph 805-10-55-5E(a) through (b).
  2. b
    There are no acquired processes that could meet the criteria in paragraph 805-10-55-5E(c) through (d).
  3. c
    It does not include both an input and a substantive process.
","snippet":"The set has outputs through the continuation of revenues with customers in Latin America. As such, Company B must evaluate the criteria in paragraph 805-10-55-5E to determine whether the set includes an input and a subst…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ec4e74f8f639609bf7186e463c62171bb5525a2188f9d6a08dac66aae66dff1","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-85","para":"55-85","html":"
Company A is a global producer of food and beverages. Company A sells the worldwide rights of Yogurt Brand F, including all related intellectual property, to Company B. Company B also acquires all customer contracts and relationships, finished goods inventory, marketing materials, customer incentive programs, raw material supply contracts, specialized equipment specific to manufacturing Yogurt Brand F, and documented processes and protocols to produce Yogurt Brand F. Company B does not receive employees, manufacturing facilities, all of the manufacturing equipment and processes required to produce the product, and distribution facilities and processes.
","snippet":"Company A is a global producer of food and beverages. Company A sells the worldwide rights of Yogurt Brand F, including all related intellectual property, to Company B. Company B also acquires all customer contracts and …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:79863175e3679aab4074cbcdd04b11bbbb053b34be0043f147af0e7c879097e9","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-86","para":"55-86","html":"
Company B first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. The gross assets include intellectual property (the trademark, the related trade name, and recipes) associated with Yogurt Brand F (the intellectual property associated with the brand is determined to be a single intangible asset in accordance with the guidance in paragraph 805-20-55-18), customer contracts and related relationships, equipment, finished goods inventory, and the excess of the consideration transferred over the fair value of the net assets acquired. Company B concludes that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets even though, for purposes of the analysis, the intellectual property is considered to be a single identifiable asset. In addition, because there is significant fair value in both tangible assets and intangible assets, Company B concludes that there is not a group of similar assets that meets this threshold.
","snippet":"Company B first considers the guidance in paragraphs 805-10-55-5A through 55-5C. The gross assets include intellectual property (the trademark, the related trade name, and recipes) associated with Yogurt Brand F (the int…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1107fb066b2bb0da024146a5ae45cd341306792de24f9f371de3842c9c8eaf45","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-87","para":"55-87","html":"
The set has outputs through the continuation of revenues, and Company B must consider the criteria in paragraph 805-10-55-5E to determine whether the set includes both inputs and a substantive process that together significantly contribute to the ability to create outputs. The set does not include an organized workforce and, therefore, does not meet the criteria in paragraph 805-10-55-5E(a) through (b). However, the acquired manufacturing processes are unique to Yogurt Brand F, and when those processes are applied to acquired inputs such as the intellectual property, raw material supply contracts, and the equipment, they significantly contribute to the ability to continue producing outputs. As such, the criterion in paragraph 805-10-55-5E(c) is met, and the set includes both inputs and substantive processes. Because the set includes inputs and substantive processes that together significantly contribute to the ability to create outputs, it is considered a business.
","snippet":"The set has outputs through the continuation of revenues, and Company B must consider the criteria in paragraph 805-10-55-5E to determine whether the set includes both inputs and a substantive process that together signi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:83a28c00b1001e7950c04cccc6f245cb4cf767e6954a501ade66925ea77f9626","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-88","para":"55-88","html":"
Bank A purchases a loan portfolio from Bank Z. The portfolio of loans consists of residential mortgages with terms, size, and risk ratings that are not significantly different. Bank A does not take over the employees of Bank Z that managed the credit risk of the portfolio and the relationship with the borrowers (such as brokers, vendors, and risk managers).
","snippet":"Bank A purchases a loan portfolio from Bank Z. The portfolio of loans consists of residential mortgages with terms, size, and risk ratings that are not significantly different. Bank A does not take over the employees of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c8993b193534bf1f55e7571fbcc077980a375c2f5dff38a01f3353b97f1203d2","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-89","para":"55-89","html":"
Bank A first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. Bank A concludes that the nature of the assets (residential mortgage loans) is similar. Bank A also concludes that the risks associated with managing and creating outputs are not significantly different because the terms, size, and risk ratings of the loans are not significantly different. Because all of the fair value of the gross assets acquired is in a group of similar identifiable assets, the set is not a business.
","snippet":"Bank A first considers the guidance in paragraphs 805-10-55-5A through 55-5C. Bank A concludes that the nature of the assets (residential mortgage loans) is similar. Bank A also concludes that the risks associated with m…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:529acb981e119bdaf9c41f4f937c53dbdc2efcd0d2245745b85cec480b8cc5cf","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-90","para":"55-90","html":"
Assume the same facts as in Scenario 1 except that the portfolio of loans consists of commercial loans with term, size, and risk ratings that are significantly different.
","snippet":"Assume the same facts as in Scenario 1 except that the portfolio of loans consists of commercial loans with term, size, and risk ratings that are significantly different.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70a39cc4af3a804565b1b587189f7ba328f30a98f8c5a1eb766c90be95c77378","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-91","para":"55-91","html":"
Bank A first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. Bank A must consider whether the loans are similar. Bank A concludes that the nature of the assets (commercial loans) is similar; however, because the term, size, and risk ratings of the loans are significantly different, Bank A concludes that the risks associated with managing and creating outputs are significantly different. Thus, Bank A concludes that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets and that it must further evaluate whether the set has the minimum requirements to be considered a business.
","snippet":"Bank A first considers the guidance in paragraphs 805-10-55-5A through 55-5C. Bank A must consider whether the loans are similar. Bank A concludes that the nature of the assets (commercial loans) is similar; however, bec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:45bbfd1c401d8118a73d226665e1dd7cfc384c776133c3ae0a9560e49382478f","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-92","para":"55-92","html":"
The set has outputs through the continuation of revenues (interest income). Consequently, Bank A considers the criteria in paragraph 805-10-55-5E to determine whether the set includes both inputs and a substantive process that together significantly contribute to the ability to create outputs. Because the set does not include an organized workforce or acquired processes, the criteria in paragraph 805-10-55-5E are not met and the set is not a business.
","snippet":"The set has outputs through the continuation of revenues (interest income). Consequently, Bank A considers the criteria in paragraph 805-10-55-5E to determine whether the set includes both inputs and a substantive proces…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7938662ed18dfc84c76a442cef0d86ad0960d2645c54699b7787de68b9147327","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-93","para":"55-93","html":"
Assume the same facts as in Scenario 2 except that Bank A takes over the employees of Bank Z that managed the credit risk of the portfolio and the relationship with the borrowers (such as brokers and risk managers). Additionally, consideration transferred is significantly higher than Bank A's estimate of the fair value of the loan portfolio.
","snippet":"Assume the same facts as in Scenario 2 except that Bank A takes over the employees of Bank Z that managed the credit risk of the portfolio and the relationship with the borrowers (such as brokers and risk managers). Addi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f7c81c7ce2f7d4d2f81673adc6993d39b4bae835601f146929295071e56be3a","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-94","para":"55-94","html":"
Bank A first considers the guidance in paragraphs
805-10-55-5A through 55-5C
. Bank A concludes that the loan portfolio does not consist of similar identifiable assets. Bank A also concludes that there is significant fair value associated with different groups of financial assets and the acquired workforce. As such, Bank A concludes that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets and that it must further evaluate whether the set has met the minimum requirements to be considered a business.
","snippet":"Bank A first considers the guidance in paragraphs 805-10-55-5A through 55-5C. Bank A concludes that the loan portfolio does not consist of similar identifiable assets. Bank A also concludes that there is significant fair…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf10faaf62579b27c6aec90af9a5167568840da48a63e4b2c502f4ca35a8b3f9","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-95","para":"55-95","html":"
The set has outputs through the continuation of revenues (interest income). Consequently, Bank A considers the criteria in paragraph 805-10-55-5E to determine whether the set includes both an input and a substantive process that together significantly contribute to the ability to create outputs.
","snippet":"The set has outputs through the continuation of revenues (interest income). Consequently, Bank A considers the criteria in paragraph 805-10-55-5E to determine whether the set includes both an input and a substantive proc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c7820bd4276c9f2361efaec739a0446068cc208f45dcee7f97127f2b4b3e480a","downloaded_from":"2026-09-10T01:22:37.779Z","last_downloaded_at":"2026-09-10T01:22:37.779Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479303","source_sha256":"a920dd250a34e8285fd2829843276281bd86a7bb7263f046e7ea47c1f24ada62"}},{"citation":"805-10-55-96","para":"55-96","html":"
Bank A evaluates the criteria in paragraph 805-10-55-5E and concludes that the criterion in paragraph 805-10-55-5E(a) is met because the set includes an organized workforce that performs processes (customer relationship management and credit risk management) critical to the ability to continue producing outputs; therefore, the set is a business.
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