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FASB Seeks to Align Accounting Guidance Between Asset Acquisition and Business Combinations

There’s an effort underway by the Financial Accounting Standards Board (“FASB”) to look at closing the gap between the accounting standards for business combinations and the accounting standards for acquisition accounting. Because these two sets of accounting guidance are different, businesses are sometimes motivated to structure merger and acquisition (“M&A”) deals in ways that avoid complex accounting. Decreasing the differences between these standards could help make M&A activity more straightforward in the future. This effort is also a continuation of the FASB’s work to more clearly define what a business is for U.S. generally accepted accounting principles (“GAAP”). Some critics. Read More.

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FASB Clarifies Definition of a Business

Improving the guidance for defining whether a transaction includes the purchase or sale of a business or an asset, the Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. Per ASU No. 2017-01, in order to be considered a business, an asset or group of assets should include an input and a practical process that form outputs. FASB Chairman Russell Golden said the new standard addresses stakeholders’ concerns about the U.S. GAAP’s business definition being applied too broadly, and that several transactions disclosed as business acquisitions are. Read More.

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