New guide clarifies accounting and valuation of business combinations

A new AICPA guide aims to demystify accounting and valuations in mergers and acquisitions and related transactions.

Valuation specialists, preparers of financial statements, and independent auditors can benefit from Accounting and Valuation Guide: Business Combinations. The guide features best practices for accounting and valuations of business combinations in accordance with FASB ASC Topics 805 and 820.

Among other things, the guide covers:

• 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; and
• Recognizing and measuring goodwill or a gain from a bargain purchase.

The guide also includes several illustrative examples demonstrating 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.

AICPA guides cover a variety of topics for accounting professionals, including audit and assurance, accounting and financial reporting, forensic and valuation services, government accounting, not-for-profit accounting, and sustainability. Visit aicpa-cima.com/cpe-learning/publication to learn more.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.