Accounting and Valuation Guide - Business Combinations

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This guide provides guidance and illustrations regarding the accounting and valuation considerations for business combination transactions. It addresses many accounting and valuation issues that have emerged over time and will help preparers, auditors, and valuation specialists understand and comply with the requirements of FASB ASC 805, Business Combinations, and FASB ASC 820, Fair Value Measurement.

This guide covers a number of accounting topics, including:

• Identifying business combination transactions and whether the acquired set meets the definition of a business or is a collection of assets.
• Identifying the acquirer.
• Measuring the consideration transferred.
• Recognizing and measuring the identifiable assets acquired and liabilities assumed, and any noncontrolling interests in the acquiree.
• Recognizing and measuring goodwill or a gain from a bargain purchase.

It also addresses a number of valuation issues that have emerged over the years. Specifically, it does the following:

• Provides guidance for assessing prospective financial information, discount rate, and transaction operating value of the acquiree.
• Addresses valuation approaches and methods as well as their application to a variety of assets acquired and liabilities assumed.
• Discusses the valuation method selection process for acquired intangible assets and addresses why certain methods, particularly the interaction of and inputs to those methods, are appropriate given their attributes.
• Includes a number of illustrative examples demonstrating, among other things, the internal rate of return analyses, the valuation method selection process, and the application of valuation methods most commonly used in practice to value a particular asset or liability.

Who Will Benefit

• Valuation specialists
• Preparers of financial statements
• Independent auditors