{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/805/50/#05-overview-and-background","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":"805-50","subtopic_title":"Related Issues","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"805-50-05-1","para":"05-1","html":"
Paragraph superseded by Accounting Standards Update No. 2014-17.
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This Subtopic presents guidance in the following Subsections:
  1. a
    General
  2. b
    Acquisition of Assets Rather than a Business
  3. c
    Transactions Between Entities Under Common Control
  4. d
    Formation of a Master Limited Partnership
  5. e
    Pushdown Accounting.
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The Acquisition of Assets Rather than a Business Subsections address a transaction in which the assets acquired and liabilities assumed do not constitute a business and require such a transaction to be accounted for as an asset acquisition. However, these Subsections do not provide guidance for the primary beneficiary of a variable interest entity (VIE) if the VIE does not constitute a business.
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As noted in paragraph 805-10-15-4(c), the guidance related to business combinations does not apply to combinations between entities or businesses under common control.
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Some transfers of net assets or exchanges of shares between entities under common control result in a change in the reporting entity. In practice, the method that many entities have used to account for those transactions is similar to the pooling-of-interests method. The Transactions Between Entities Under Common Control Subsections provide guidance on preparing financial statements and related disclosures for the entity that receives the net assets.
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The Formation of a Master Limited Partnership Subsections provide guidance on when a new basis of accounting may be recorded for the assets and liabilities of a master limited partnership.
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Master limited partnerships are partnerships in which interests are publicly traded. Most master limited partnerships are formed from assets in existing businesses. Typically, the general partner of the master limited partnership is affiliated with the existing business (that is, the master limited partnership is usually operated as an extension of or complementary to the business of the general partner). The purposes for forming a master limited partnership vary. They can be formed to realize the value of undervalued assets, to pass income and tax-deductible losses directly through to owners, to raise capital, to combine several existing partnerships, or as a vehicle to enable entities to sell, spin off, or liquidate existing operations. A master limited partnership may be created in a variety of ways. Whether a particular transaction is a business combination that should be accounted for using the acquisition method or a transaction between entities under common control can be determined only after a careful analysis of all facts and circumstances. The Formation of a Master Limited Partnership Subsections identify specific transactions involving master limited partnerships and provide guidance on whether a new basis of accounting is appropriate.
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Paragraph superseded by Accounting Standards Update No. 2014-17.
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The guidance in the Pushdown Accounting Subsections addresses whether and at what threshold an acquiree that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements.
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