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Chapter 10 - Other Acquisition Method Guidance Part 1
Chapter 10 - Other Acquisition Method Guidance Part 1
Learning objectives
At the end of this module, the students will learn the following:
• Measurement period
• Assessing whether a transaction is separate from the measurement period
• Accounting for arrangement entered into concurrently with the business
combination
Week 012: OTHER ACQUISITION METHOD GUIDANCE PART 1
Introduction
• This module discusses other aspects of the acquisition method, including the
measurement period, assessing whether a transaction is separate from the
business combination (e.g., a compensation arrangement), business combinations
achieved in stages (i.e., step acquisitions), partial acquisitions, and reverse
acquisitions.
Week 012: OTHER ACQUISITION METHOD GUIDANCE PART 1
Measurement Period
• The measurement period is the period after the acquisition date during which the
acquirer may adjust the provisional amounts recognized for a business combination.
The measurement period provides the acquirer with a reasonable time to obtain the
information necessary to identify and measure any of the following as of the acquisition
date in accordance with the requirements of this Topic:
• The identifiable assets acquired, liabilities assumed, and any noncontrolling interest
in the acquiree
• The consideration transferred for the acquiree (or the other amount used in
measuring goodwill in accordance with paragraphs 805-30-30-1 through 30-3)
• In a business combination achieved in stages, the equity interest in the acquiree
previously held by the acquirer (see paragraph 805-30-30-1(a)(3))
• The resulting goodwill recognized in accordance with paragraph 805-30-30-1 or the
gain on a bargain purchase recognized in accordance with paragraph 805-30-25-2.
Week 012: OTHER ACQUISITION METHOD GUIDANCE PART 1
• An acquirer may not have the information necessary to complete the accounting for a
business combination by the end of the reporting period after the acquisition,
especially when the business combination closes shortly before the end of the
acquirer’s reporting period or when the acquiree’s operations are significant or
complex. Thus, ASC 805-10-25-15 provides a measurement period during which an
acquirer can obtain the information it needs to identify and measure the consideration
transferred, assets acquired, and liabilities assumed, as well as any previously held or
noncontrolling interests. The objective of the measurement period is to give the
acquirer a reasonable period in which to obtain the information necessary to complete
the accounting for the business combination while maintaining normal reporting
schedules.
Week 012: OTHER ACQUISITION METHOD GUIDANCE PART 1
• The measurement period for a particular asset, liability, or equity instrument ends
once the acquirer determines that either (1) the necessary information has been
obtained or (2) the information is not available. However, the measurement period for
all items is limited to one year from the acquisition date.
• When the accounting for a business combination is incomplete at the end of the
reporting period, the acquirer must not knowingly understate or overstate an asset or
liability, as might be the case if no amount, a nominal amount, or the acquiree’s
carrying amount were to be used as the provisional amount until the measurement
has been completed. Instead, the acquirer must determine provisional amounts by
using the best information available. If the acquirer becomes aware of new
information during the measurement period related to conditions that existed as of
the acquisition date, it must make subsequent adjustments to the provisional amounts,
and additional assets acquired or liabilities assumed might be identified for
recognition and measurement.
Week 012: OTHER ACQUISITION METHOD GUIDANCE PART 1