FASB to Clarify Definition of a Business
The Financial Accounting Standards Board (“FASB”) is seeking comments on a proposed Accounting Standards Update (ASU) that would clarify the definition of a business, and help organizations with assessing whether transactions should be considered as either acquisitions (or disposals) of assets or businesses. The proposed ASU, Business Combinations (Topic 805): Clarifying the Definition of a Business, would address concerns over the current definition and provide a stronger framework for organizations to determine when a set of assets and activities should be classified as a business. Additionally, the framework would offer a more consistent application of the guidance, lower the costs of its application, and provide a more operable definition.
Organizations would be able to apply the proposed amendments prospectively to transactions that arise on or after the effective date. At transition, no disclosures would be required. The effective date and early adoption of the proposed amendments will be decided after stakeholder feedback is taken into consideration.
Comments on the proposed ASU are due Friday, January 22, 2016.