Updated guide to accounting for business combinations

ARTICLE | July 13, 2023

Authored by RSM US LLP

An updated edition of A guide to accounting for business combinations is now available. Our comprehensive guide is designed to assist middle market companies in their application of the guidance in Topic 805, Business Combinations, of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). This edition reflects recent changes made to the accounting for business combinations by the FASB and addresses many additional practice issues. The following list highlights some of the significant topics added, expanded upon or otherwise updated in this edition of our business combinations guide:

• Acquired leases within the scope of ASC 842, Leases, including treatment of a right-of-use asset when applying the screen to determine whether a business was acquired
• Factors to consider when determining whether a new entity should be considered a buyer
• Accrued bonuses for a preexisting bonus plan of the target
• Acquired customer contracts within the scope of ASC 606, Revenue from Contracts with Customers
• Payments to employees in connection with an acquisition
• Certain insurance-related costs incurred related to a business combination
• Presentation of acquired cash
• Private company accounting alternative for evaluating triggering events for goodwill impairment testing

A summary of all significant changes made in this edition can be found in Appendix F of the guide.