# ASC 805-40-45: Business Combinations — Reverse Acquisitions — 45 Other Presentation Matters Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/805/40/#45-other-presentation-matters) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:24:47.609Z to 2026-09-10T01:24:47.609Z Record version: sha256:14a7c44307582955058da130ecf8e380769677bc33c2992c0edcabac3b912d75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-40-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/805/40/#45-other-presentation-matters) SEC content: no #### Preparation and Presentation of Consolidated Financial Statements ##### [805-40-45-1](https://asc.understandingaccounting.org/asc/805/40/#805-40-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:24:47.609Z to 2026-09-10T01:24:47.609Z Record version: sha256:97290714a24a86123bc560d8842ceb2af71a07627a522d99a2a9c866c1f9379c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Consolidated financial statements prepared following a [reverse acquisition](https://asc.understandingaccounting.org/glossary/r/#reverse-acquisition "An acquisition in which the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes based on the guidance in paragraphs 805-10-55-11805-10-55-12805-10-55-13805-10-55-14805-10-55-15. The entity whose equity interests are acquired (the legal acquiree) must be the acquirer for accounting purposes for the transaction to be considered a reverse acquisition.") are issued under the name of the legal parent (accounting acquiree) but described in the notes as a continuation of the financial statements of the legal subsidiary (accounting acquirer), with one adjustment, which is to retroactively adjust the accounting acquirer's legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent (the accounting acquiree). Comparative information presented in those consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent (accounting acquiree). ##### [805-40-45-2](https://asc.understandingaccounting.org/asc/805/40/#805-40-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:24:47.609Z to 2026-09-10T01:24:47.609Z Record version: sha256:944c70d26975b635fef6c2dc948cd6ddc12b0068a119fb43dc409d8d418f4b84 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the consolidated financial statements represent the continuation of the financial statements of the legal subsidiary except for its capital structure, the consolidated financial statements reflect all of the following: 1. a The assets and liabilities of the legal subsidiary (the accounting acquirer) recognized and measured at their precombination carrying amounts. 2. b The assets and liabilities of the legal parent (the accounting acquiree) recognized and measured in accordance with the guidance in this Topic applicable to [business combinations](https://asc.understandingaccounting.org/glossary/b/#business-combination "A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as true mergers or mergers of equals also are business combinations. See also Acquisition by a Not-for-Profit Entity."). 3. c The retained earnings and other equity balances of the legal subsidiary (accounting acquirer) before the business combination. 4. d The amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary (the accounting acquirer) outstanding immediately before the business combination to the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of the legal parent (accounting acquiree) determined in accordance with the guidance in this Topic applicable to business combinations. However, the equity structure (that is, the number and type of equity interests issued) reflects the equity structure of the legal parent (the accounting acquiree), including the equity interests the legal parent issued to effect the combination. Accordingly, the equity structure of the legal subsidiary (the accounting acquirer) is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent (the accounting acquiree) issued in the reverse acquisition. 5. e The [noncontrolling interest](https://asc.understandingaccounting.org/glossary/n/#noncontrolling-interest "The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest.")'s proportionate share of the legal subsidiary's (accounting acquirer's) precombination carrying amounts of retained earnings and other equity interests as discussed in paragraphs [805-40-25-2](https://asc.understandingaccounting.org/asc/805/40/#805-40-25-2) and [805-40-30-3](https://asc.understandingaccounting.org/asc/805/40/#805-40-30-3) and illustrated in Example 1, Case B (see paragraph [805-40-55-18](https://asc.understandingaccounting.org/asc/805/40/#805-40-55-18)). #### EPS ##### [805-40-45-3](https://asc.understandingaccounting.org/asc/805/40/#805-40-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:24:47.609Z to 2026-09-10T01:24:47.609Z Record version: sha256:49e42d350bc12f4210449f3c72f07f22543920da0db5711a6b767d57f4798e01 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As noted in (d) in the preceding paragraph, the equity structure in the consolidated financial statements following a reverse acquisition reflects the equity structure of the legal acquirer (the accounting acquiree), including the equity interests issued by the legal acquirer to effect the business combination. ##### [805-40-45-4](https://asc.understandingaccounting.org/asc/805/40/#805-40-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:24:47.609Z to 2026-09-10T01:24:47.609Z Record version: sha256:aa2329892f47178d4e24d309a79d533eb6361d2bea13de6dd893cfff015ed780 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In calculating the weighted-average number of common shares outstanding (the denominator of the earnings-per-share \[EPS\] calculation) during the period in which the reverse acquisition occurs: 1. a The number of common shares outstanding from the beginning of that period to the [acquisition date](https://asc.understandingaccounting.org/glossary/a/#acquisition-date "The date on which the acquirer obtains control of the acquiree.") shall be computed on the basis of the weighted-average number of common shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement. 2. b The number of common shares outstanding from the acquisition date to the end of that period shall be the actual number of common shares of the legal acquirer (the accounting acquiree) outstanding during that period. ##### [805-40-45-5](https://asc.understandingaccounting.org/asc/805/40/#805-40-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:24:47.609Z to 2026-09-10T01:24:47.609Z Record version: sha256:3eedbe08c276f030b61920abd5bd24f5a38d91d214b8217fed27f3d818e94c97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The basic EPS for each comparative period before the acquisition date presented in the consolidated financial statements following a reverse acquisition shall be calculated by dividing (a) by (b): 1. a The income of the legal acquiree attributable to common shareholders in each of those periods 2. b The legal acquiree's historical weighted-average number of common shares outstanding multiplied by the exchange ratio established in the acquisition agreement.