# ASC 805-50-55: Business Combinations — Related Issues — 55 Implementation Guidance and Illustrations

Source: FASB Accounting Standards Codification, Basic View

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## ASC 805-50-55: 55 Implementation Guidance and Illustrations

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#### Illustrations

##### [805-50-55-1](https://asc.understandingaccounting.org/asc/805/50/#805-50-55-1)

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This Example illustrates the application of the relative fair value method when assets are acquired in a group outside a business combination as discussed in paragraph [805-50-30-3](https://asc.understandingaccounting.org/asc/805/50/#805-50-30-3).

-   On January 1, 20X9, Entity A purchased land, building, and equipment for $500,000 in cash. Transaction costs of $25,000 were incurred.
    
-   To allocate the cost, the fair value of the individual assets is determined based on the guidance in Topic 820.
    
-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-B895154A-6A30-4326-A060-4EA6102C3427-low.gif)
    
    Asset Fair Value (Based on Measurement Guidance in Topic 820) Percent of Total Fair Value × Purchase Price + Transaction Costs = Allocated Cost of Assets Acquired + Transaction Costs Land " $350,000 " 61% (a) " $525,000 " " $319,565 " Building " 175,000 " 30% (b) " 525,000 " " 159,783 " Equipment " 50,000 " 9% (c) " 525,000 " " 45,652 " Total " $575,000 " 100% " $525,000 " (a) "$350,000/$575,000 = 61%" (b) "$175,000/$575,000 = 30%" (c) "$50,000/$575,000 = 9%"