To qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in FASB Concepts Statement No. 6, Elements of Financial Statements, at the acquisition date. For example, costs the acquirer expects but is not obligated to incur in the future to effect its plan to exit an activity of an acquiree or to terminate the employment of or relocate an acquiree's employees are not liabilities at the acquisition date. Therefore, the acquirer does not recognize those costs as part of applying the acquisition method. Instead, the acquirer recognizes those costs in its postcombination financial statements in accordance with other applicable generally accepted accounting principles (GAAP).
(P) December 16, 2024; (N) December 16, 2025
105-10-65-9To qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must exist at the acquisition date. For example, costs the acquirer expects but is not obligated to incur in the future to effect its plan to exit an activity of an acquiree or to terminate the employment of or relocate an acquiree's employees are not liabilities at the acquisition date. Therefore, the acquirer does not recognize those costs as part of applying the acquisition method. Instead, the acquirer recognizes those costs in its postcombination financial statements in accordance with other applicable generally accepted accounting principles (GAAP). Paragraphs provide guidance on recognizing operating leases and paragraphs provide guidance on recognizing intangible assets. Paragraphs 805-20-25-17 through 25-28B specify the types of identifiable assets and liabilities that include items for which this Subtopic and Subtopic 805-740 provide limited exceptions to the recognition principle and conditions in paragraphs . (P) December 16, 2028; (N) December 16, 2029
832-10-65-2Paragraphs provide guidance on recognizing operating leases and paragraphs provide guidance on recognizing intangible assets. Paragraphs specify the types of identifiable assets and liabilities that include items for which this Subtopic and Subtopic 805-740 provide limited exceptions to the recognition principle and conditions in paragraphs . At the acquisition date, the acquirer shall classify or designate the identifiable assets acquired and liabilities assumed as necessary to subsequently apply other GAAP. The acquirer shall make those classifications or designations on the basis of the contractual terms, economic conditions, its operating or accounting policies, and other pertinent conditions as they exist at the acquisition date.
Guidance on recognizing identifiable intangible assets, including reacquired rights, follows.
(P) December 16, 2027; (N) December 16, 2028
818-10-65-1Guidance on recognizing
particular assets acquired and liabilities assumed is as follows.
The acquirer shall recognize separately from goodwill the identifiable intangible assets acquired in a business combination. An intangible asset is identifiable if it meets either the separability criterion or the contractual-legal criterion described in the definition of identifiable. Additional guidance on applying that definition is provided in paragraphs
,
, and Example 1 (see paragraph
805-20-55-52). For guidance on the recognition and subsequent measurement of a
defensive intangible asset, see Subtopic
350-30.
(P) December 16, 2027; (N) December 16, 2028
818-10-65-1An acquirer shall recognize an environmental credit acquired in a business combination as an asset, regardless of whether it is probable that the acquirer will use that environmental credit to settle an environmental credit obligation, transfer the environmental credit in an exchange transaction, or use the environmental credit in a nonreciprocal transfer. An environmental credit recognized as an asset in a business combination shall subsequently be accounted for in accordance with Topic 818, including the recognition reassessment requirements in paragraph 818-20-40-2. (P) December 16, 2027; (N) December 16, 2028
818-10-65-1An item acquired in a business combination that does not meet the definition of an environmental credit solely because it is not separately transferable in an exchange transaction at the acquisition date is not an identifiable asset and shall not be recognized as an asset. (P) December 16, 2027; (N) December 16, 2028
818-10-65-1When evaluating whether an environmental credit obligation liability should be recognized in a business combination, an entity shall determine whether environmental credits would be due assuming that the acquisition date is the end of the regulatory compliance period, regardless of whether the regulatory compliance period ends after the acquisition date. This Topic provides limited exceptions to the recognition and measurement principles applicable to business combinations. Paragraphs 805-20-25-17 through 25-28C specify the types of identifiable assets and liabilities that include items for which this Subtopic provides limited exceptions to the recognition principle in paragraph 805-20-25-1. The acquirer shall apply the specified GAAP or the specified requirements rather than that recognition principle to determine when to recognize the assets or liabilities identified in paragraphs 805-20-25-17 through 25-28C. That will result in some items being recognized either by applying recognition conditions in addition to those in paragraphs or by applying the requirements of other GAAP, with results that differ from applying the recognition principle and conditions in paragraphs . (P) December 16, 2028; (N) December 16, 2029
832-10-65-2This Topic provides limited exceptions to the recognition and measurement principles applicable to business combinations. Paragraphs specify the types of identifiable assets and liabilities that include items for which this Subtopic provides limited exceptions to the recognition principle in paragraph 805-20-25-1. The acquirer shall apply the specified GAAP or the specified requirements rather than that recognition principle to determine when to recognize the assets or liabilities identified in paragraphs . That will result in some items being recognized either by applying recognition conditions in addition to those in paragraphs or by applying the requirements of other GAAP, with results that differ from applying the recognition principle and conditions in paragraphs . Guidance is presented on all of the following exceptions to the recognition principle:
- a
Assets and liabilities arising from contingencies
- b
Income taxes
- c
Employee benefits
- d
Indemnification assets
- e
Leases
- f
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Guidance is presented on all of the following exceptions to the recognition principle:
- a
Assets and liabilities arising from contingencies
- b
Income taxes
- c
Employee benefits
- d
Indemnification assets
- e
Leases
- f
- g
If the acquisition-date fair value of the asset or liability arising from a contingency can be determined during the measurement period, that asset or liability shall be recognized at the acquisition date. For example, the acquisition-date fair value of a warranty obligation often can be determined.
Section
805-740-25 establishes the recognition guidance for accounting for income taxes in a business combination.
Guidance on defined benefit pension plans is presented in Subtopic
715-30.
If an acquiree sponsors a single-employer defined benefit pension plan, the acquirer shall recognize as part of the business combination an asset or a liability representing the funded status of the plan (see paragraph 715-30-25-1). Paragraph
805-20-30-15 provides guidance on determining that funded status.
If an acquiree participates in a multiemployer plan, and it is probable as of the acquisition date that the acquirer will withdraw from that plan, the acquirer shall recognize as part of the business combination a withdrawal liability in accordance with Subtopic 450-20. Guidance on defined benefit other postretirement plans is presented in Subtopic
715-60.
If an acquiree sponsors a single-employer defined benefit postretirement plan, the acquirer shall recognize as part of the business combination an asset or a liability representing the funded status of the plan (see paragraph 715-60-25-1). Paragraph
805-20-30-15 provides guidance on determining that funded status.
If an acquiree participates in a multiemployer plan and it is probable as of the acquisition date that the acquirer will withdraw from that plan, the acquirer shall recognize as part of the business combination a withdrawal liability in accordance with Subtopic 450-20. See also the recognition-related guidance for the following other employee benefit arrangements:
- a
One-time termination benefits in connection with exit or disposal activities. See Section 420-10-25. - b
- c
Deferred compensation contracts. See Section 710-10-25. - d
Nonretirement postemployment benefits. See Section 712-10-25.
The seller in a business combination may contractually indemnify the acquirer for the outcome of a contingency or uncertainty related to all or part of a specific asset or liability. For example, the seller may indemnify the acquirer against losses above a specified amount on a liability arising from a particular contingency; in other words, the seller will guarantee that the acquirer's liability will not exceed a specified amount. As a result, the acquirer obtains an indemnification asset. The acquirer shall recognize an indemnification asset at the same time that it recognizes the indemnified item, measured on the same basis as the indemnified item, subject to the need for a valuation allowance for uncollectible amounts. Therefore, if the indemnification relates to an asset or a liability that is recognized at the acquisition date and measured at its acquisition-date fair value, the acquirer shall recognize the indemnification asset at the acquisition date measured at its acquisition-date fair value.
For leases for which the acquiree is a lessee, the acquirer may elect, as an accounting policy election by class of underlying asset and applicable to all of the entity's acquisitions, not to recognize assets or liabilities at the acquisition date for leases that, at the acquisition date, have a remaining lease term of 12 months or less. This includes not recognizing an intangible asset if the terms of an operating lease are favorable relative to market terms or a liability if the terms are unfavorable relative to market terms.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2For a grant related to income, an acquirer shall recognize deferred income in accordance with Topic 832 on government grants at the acquisition date, unless an entity has fully complied with the conditions attached to a government grant, in which case the acquirer shall not recognize deferred income.