BUSINESS COMBINATIONS: CLARIFYING THE DEFINITION OF A BUSINESS
|
|
- Jacob Gallagher
- 6 years ago
- Views:
Transcription
1 BUSINESS COMBINATIONS: CLARIFYING THE DEFINITION OF A BUSINESS Prepared by: Robert Dombrowski, Partner, National Professional Standards Group, RSM US LLP robert.dombrowski@rsmus.com, TABLE OF CONTENTS Overview... 2 Main provisions... 3 Screen... 3 Revised essential elements and related framework... 3 No outputs present... 4 Outputs present... 4 Examples... 4 Disclosures... 7 Effective date and transition... 7 Differences between the accounting for a business combination and an asset acquisition... 8 The FASB material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.
2 Overview The definition of a business affects a number of areas of accounting, including acquisitions, disposals, goodwill and consolidation. In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) , Business Combinations (Topic 805): Clarifying the Definition of a Business, to clarify the definition of a business by adding guidance that helps entities evaluate whether transactions should be accounted for as acquisitions (or disposals) of businesses or assets. This white paper provides information about the ASU s main provisions, effective date and transition, along with some examples. Before the issuance of ASU , the guidance on the definition of a business was broadly interpreted and sometimes difficult to apply. This resulted in many transactions being treated as business combinations even in cases where the transactions appeared to be more similar to asset acquisitions. The differences between these two models of accounting for transactions are significant. For example, in a business combination, consideration transferred (including contingent consideration), assets acquired and liabilities assumed are recorded at their fair values with the difference resulting in goodwill or a bargain purchase gain. In addition, transaction costs are expensed as incurred. In contrast, in an asset acquisition, contingent consideration is only recorded when the contingency is resolved and the consideration is paid or becomes payable. Further, the cost of the consideration includes transaction costs and is allocated to assets acquired and liabilities assumed based on their relative fair values, with no goodwill or bargain purchase recognized. Under the prior guidance in Topic 805, there were three elements of a business inputs, processes and outputs. While a set of assets and activities (a set) that is a business typically has outputs, those outputs were not required to be present to meet the definition of a business. Further, if market participants could acquire the set and continue to produce outputs, all inputs and processes that a seller uses in operating a set were not required. The amendments made by ASU first provide a screen to determine when a set is not a business. If this screen is not met, the ASU provides revised guidance on the criteria that must be met for the set to be considered a business at a minimum, a set must include an input and a substantive process that together significantly contribute to the ability to create outputs. The ASU also removes the evaluation of whether a market participant could replace missing elements, and provides a framework to help entities evaluate whether an input and a substantive process are present. It is expected that the ASU s guidance will result in fewer transactions being treated as business combinations. As demonstrated in the examples in the ASU, many real estate transactions that previously were accounted for as business combinations will be accounted for as asset purchases due to the use of the screen. In other industries, such as consumer or industrial products industries, the screening provision is not expected to have as significant of an impact. However, the change in the essential elements needed for a set to be considered a business likely will result in fewer transactions meeting the revised definition. Public business entities should apply the amendments in the ASU to annual periods beginning after December 15, 2017, including interim periods therein, and all other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, Early adoption is permitted. In the future, the FASB plans to consider whether differences in the guidance applicable to acquisitions and the derecognition of assets and businesses could be minimized. 2
3 Main provisions Screen In new paragraphs A to 55-5C of the FASB s Accounting Standards Codification (ASC), the ASU provides a screen that is applied first to a set of activities and assets. If the screen is met, the set is not considered a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the screen is met. For purposes of the screen, gross assets should exclude cash and cash equivalents, deferred tax assets and goodwill resulting from the effects of deferred tax liabilities. A single identifiable asset is defined in ASC B as follows: A single identifiable asset includes any individual asset or group of assets that could be recognized and measured as a single identifiable asset in a business combination. However, for purposes of this evaluation, either of the following should be considered a single asset: a. A tangible asset that is attached to and cannot be physically removed and used separately from another tangible asset without incurring significant cost or significant diminution in utility or fair value to either asset (for example land and building) b. In-place lease intangibles, including favorable and unfavorable intangible assets or liabilities, and the related leased assets. Note that the two preceding items are only applicable in the context of applying the screen and do not change existing guidance related to the recognition and measurement of the individual assets. ASC C includes the following guidance for evaluating whether assets are similar: A group of similar assets includes multiple assets identified in accordance with paragraph B. When evaluating whether assets are similar, an entity should consider the nature of each single identifiable asset and the risks associated with managing and creating outputs from the assets (that is, the risk characteristics). However, the following should not be considered similar assets: a. A tangible asset and an intangible asset b. Identifiable intangible assets in different major intangible asset classes (for example, customer-related intangibles, trademarks, and in-process research and development) c. A financial asset and a nonfinancial asset d. Different major classes of financial assets (for example, accounts receivable and marketable securities) e. Different major classes of tangible assets (for example, inventory, manufacturing equipment, and automobiles) f. Identifiable assets within the same major asset class that have significantly different risk characteristics. Revised essential elements and related framework If the screen is not met, consideration must be given to whether certain essential elements are present in the set. To be considered a business, the set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Output has been redefined in ASC (c) as [t]he result of inputs and processes applied to those inputs that provide goods or services to customers, investment income (such as dividends or interest), or other revenues. ASC D to 55-6 and to 55-9, which were added or revised by the ASU, provide a framework to assist an entity in evaluating whether the set includes both an input and a substantive process. The criteria are more stringent for sets without outputs. 3
4 No outputs present When a set does not have outputs (such as a startup company with no revenues), the criteria are considered met only if the set includes employees that form an organized workforce and an input that the workforce could develop or convert into output. As indicated in ASC D, [t]he organized workforce must have the necessary skills, knowledge, or experience to perform an acquired process (or group of processes) that when applied to another acquired input or inputs is critical to the ability to develop or convert that acquired input or inputs into outputs A process (or group of processes) is not critical if, for example, it is considered ancillary or minor in the context of all the processes required to create outputs. Outputs present When a set has outputs (i.e., a continuation of revenue both before and after the transaction), per ASC E the criteria are considered met when any of the following are present: a. Employees that form an organized workforce that has the necessary skills, knowledge, or experience to perform an acquired process (or group of processes) that when applied to an acquired input or inputs is critical to the ability to continue producing outputs. A process (or group of processes) is not critical if, for example, it is considered ancillary or minor in the context of all of the processes required to continue producing outputs. b. An acquired contract that provides access to an organized workforce that has the necessary skills, knowledge or experience to perform an acquired process (or group of processes) that when applied to an acquired input or inputs is critical to the ability to continue producing outputs. An entity should assess the substance of an acquired contract and whether it has effectively acquired an organized workforce that performs a substantive process (for example, considering the duration and the renewal terms of the contract). c. The acquired process (or group of processes) when applied to an acquired input or inputs significantly contributes to the ability to continue producing outputs and cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs. d. The acquired process (or group of processes) when applied to an acquired input or inputs significantly contributes to the ability to continue producing outputs and is considered unique or scarce. Examples In ASC to 55-96, the ASU provides a number of useful new illustrations that demonstrate the application of its provisions. The following are some relevant examples from those paragraphs. Case A: Acquisition of Real Estate, Scenario 1 ABC acquires, renovates, leases, sells, and manages real estate properties. ABC acquires a portfolio of 10 single-family homes that each have in-place leases. The only elements included in the acquired set are the 10 single family homes and the 10 in-place leases. Each single-family home includes the land, building, and property improvements. Each home has a different floor plan, square footage, lot, and interior design. No employees or other assets are acquired. ABC first considers the threshold guidance in paragraphs A through 55-5C. ABC concludes that the land, building, property improvements, and in-place leases at each property can be considered a single asset in accordance with paragraph B. That is, the building and property improvements are attached to the land and cannot be removed without incurring significant cost. Additionally, the in-place lease is an intangible asset that should be combined with the related real estate and considered a single asset. ABC also concludes that the 10 single assets (the combined land, building, in-place lease intangible, and property improvements) are similar. Each home has a different floor plan; however, the nature of the assets (all single-family homes) are similar. ABC also concludes that the risks associated with managing and creating outputs are not significantly different. That is, the risks associated with operating the 4
5 properties and tenant acquisition and management are not significantly different because the types of homes and class of customers are not significantly different. Similarly, the risks associated with operating in the real estate market of the homes acquired are not significantly different. Consequently, ABC concludes that substantially all of the fair value of the gross assets acquired is concentrated in the group of similar identifiable assets; thus, the set is not a business. RSM commentary: In this case the screen was met, and therefore the set was determined to not be a business. The transaction was determined to be an asset acquisition. Case A: Acquisition of Real Estate, Scenario 2 Assume the same facts as in Scenario 1 except that ABC also acquires an office park with six 10-story office buildings leased to maximum occupancy of which all have significant fair value. ABC also acquires the vendor contracts for outsourced cleaning, security, and maintenance. Seller s employees that perform leasing (sales, underwriting, and so forth), tenant management, financing, and other strategic management processes are not included in the set. ABC plans to replace the property management and employees with its own internal resources. ABC concludes that the single-family homes and office park are not similar assets. ABC considers the risks associated with operating the assets, obtaining tenants, and tenant management between the singlefamily homes and office park to be significantly different because the scale of operations and risks associated with the class of customers are significantly different. Therefore, substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets. Thus, ABC must further evaluate whether the set has the minimum requirements to be considered a business. The set has continuing revenues through the in-place leases and, therefore, has outputs. ABC must consider the criteria in paragraph E to determine whether the set includes both an input and a substantive process that together significantly contribute to the ability to create outputs. ABC concludes that the criteria in paragraph E (a) through (b) are not met because the set does not include employees and the processes performed through the cleaning and security contracts (the only processes acquired) will be considered ancillary or minor in the context of all the processes required to create outputs in the real estate industry. That is, while those outsourcing agreements may be considered to provide an organized workforce processes performed by the cleaning, security, and maintenance personnel are not considered critical in the context of all the processes required to create outputs. ABC also concludes that the criterion in paragraph E(c) is not met because the cleaning and security processes could be easily replaced with little cost, effort, or delay in the ability to continue producing outputs. While the cleaning and security processes are necessary for continued operations of the buildings, these contracts can be replaced quickly with little effect on the ability to continue producing outputs. ABC concludes that the criterion in paragraph E (d) is not met because the cleaning and security contracts are not considered unique or scarce. That is, these types of arrangements are readily accessible in the marketplace. Because none of the criteria were met, ABC concludes that the set does not include both an input and substantive processes that together significantly contribute to the ability to create outputs and, therefore, is not considered a business. RSM commentary: In this case, the screen was not met; therefore ABC had to evaluate whether the essential elements of a business were present. There were outputs due to continuing revenues, so ABC analyzed whether both an input and significant process were acquired. Because there was no process acquired that was critical to the ability to continue 5
6 producing outputs, the set was determined not to be a business. The transaction was determined to be an asset acquisition. Case A: Acquisition of Real Estate, Scenario 3 Assume the same facts as in Scenario 2, except that the set includes the employees responsible for leasing, tenant management, and managing and supervising all operational processes. The set has continuing revenues through the in-place leases and, therefore, has outputs. ABC must consider the criteria in paragraph E to determine whether the set includes both an input and a substantive process that together significantly contribute to the ability to create outputs. ABC determines that the criterion in paragraph E (a) is met because the set includes an organized workforce that performs processes that when applied to the acquired inputs in the set (the land, building, and in-place leases) are critical to the ability to continue producing outputs. That is, ABC concludes that the leasing, tenant management, and supervision of the operational processes are critical to the creation of outputs. Because it includes both an input and a substantive process, the set is considered a business. RSM commentary: In this case, the screen was not met; therefore ABC had to evaluate whether the essential elements of a business were present. There were outputs due to continuing revenues, so ABC analyzed whether both an input and significant process were acquired. Because inputs were acquired, as well as a process in the form of an organized workforce that was critical to the ability to continue producing outputs, the set was determined to be a business. The transaction was determined to be a business combination. Case E: Acquisition of a Manufacturing Facility Widget Co. manufactures complex equipment and has manufacturing facilities throughout the world. Widget Co. decided to idle a facility in a foreign jurisdiction in a reorganization of its manufacturing footprint and furloughed the assembly line employees. Acquirer enters into an agreement to purchase a manufacturing facility and related equipment from Widget Co. To comply with the local labor laws, Acquirer also must assume the furloughed employees. The assets acquired include the equipment and facility (land and building) but no intellectual property, inventory, customer relationships, or any other inputs. Acquirer first considers the guidance in paragraphs A through 55-5C. Acquirer concludes that the equipment in the facility can be removed without significant cost or diminution in utility or fair value because the equipment is not attached to the building and can be used in many types of manufacturing facilities. Therefore, the equipment and building are not a single asset. Furthermore, the equipment and facility are not considered similar assets because they are different major classes of tangible assets. Acquirer determines that there is significant fair value in both the equipment and the facility and, thus, concludes that it must further evaluate whether the set has the minimum requirements to be considered a business. The set is not currently producing outputs because there is no continuation of revenue before and after the transaction; therefore, Acquirer considers the criteria in paragraph D and whether the set includes both employees that form an organized workforce and an input that the workforce could develop or convert into output. The set includes employees that have the necessary skills, knowledge, or experience to use the equipment; however, without intellectual property or other inputs that could be converted into outputs using the equipment, the set does not include both an organized workforce and an input that will meet the criteria in paragraph D. That is, the equipment itself cannot be developed or converted into an output by those employees. Therefore, the set is not a business. RSM commentary: In this case, the screen was not met; therefore Acquirer had to evaluate whether the essential elements of a business were present. There were no outputs due to 6
7 continuing revenues, so Acquirer analyzed whether the set includes employees that form an organized workforce and an input that the workforce could develop or convert into output. The organized workforce was present. However, there was no input that the workforce could convert; therefore, the set was determined not to be a business. The transaction was determined to be an asset acquisition. Case G: Acquisition of Brands Company A is a global producer of food and beverages. Company A sells the worldwide rights of Yogurt Brand F, including all related intellectual property, to Company B. Company B also acquires all customer contracts and relationships, finished goods inventory, marketing materials, customer incentive programs, raw material supply contracts, specialized equipment specific to manufacturing Yogurt Brand F, and documented processes and protocols to produce Yogurt Brand F. Company B does not receive employees, manufacturing facilities, all of the manufacturing equipment and processes required to produce the product, and distribution facilities and processes. Company B first considers the guidance in paragraphs A through 55-5C. The gross assets include intellectual property (the trademark, the related trade name, and recipes) associated with Yogurt Brand F (the intellectual property associated with the brand is determined to be a single intangible asset in accordance with the guidance in paragraph ), customer contracts and related relationships, equipment, finished goods inventory, and the excess of the consideration transferred over the fair value of the net assets acquired. Company B concludes that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets even though, for purposes of the analysis, the intellectual property is considered to be a single identifiable asset. In addition, because there is significant fair value in both tangible assets and intangible assets, Company B concludes that there is not a group of similar assets that meets this threshold. The set has outputs through the continuation of revenues, and Company B must consider the criteria in paragraph E to determine whether the set includes both inputs and a substantive process that together significantly contribute to the ability to create outputs. The set does not include an organized workforce and, therefore, does not meet the criteria in paragraph E (a) through (b). However, the acquired manufacturing processes are unique to Yogurt Brand F, and when those processes are applied to acquired inputs such as the intellectual property, raw material supply contracts, and the equipment, they significantly contribute to the ability to continue producing outputs. As such, the criterion in paragraph E(c) is met, and the set includes both inputs and substantive processes. Because the set includes inputs and substantive processes that together significantly contribute to the ability to create outputs, it is considered a business. RSM commentary: In this case, the screen was not met; therefore, Company B had to evaluate whether the essential elements of a business were present. There were outputs due to continuing revenues, so Company B analyzed whether both an input and significant process were acquired. Because inputs were acquired, as well as a process in the form of unique manufacturing processes and protocols that were critical to the ability to continue producing outputs, the set was determined to be a business. The transaction was determined to be a business combination. Disclosures There are no incremental disclosure requirements as a result of this ASU and no disclosures are required at transition. Effective date and transition Public business entities should apply the amendments in ASU to annual periods beginning after December 15, 2017, including interim periods therein. All other entities should apply the amendments to 7
8 annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, However, an entity may early adopt the ASU in any interim or annual period for which it has not yet reported the transaction in financial statements that have been issued or made available for issuance. The amendments in the ASU should be applied prospectively on or after the effective date. Differences between the accounting for a business combination and an asset acquisition As discussed more fully in Section 15.1 of our publication, A guide to accounting for business combinations, purchases of assets (or assets and liabilities [net assets]) that do not constitute a business are not accounted for as business combinations using the acquisition method captured in ASC 805. Reaching a conclusion on the accounting model that should be applied to a transaction as early in the acquisition process as possible is important because there are significant differences between the accounting for a business combination and the accounting for an asset acquisition. In addition, the buyer in a transaction that should be accounted for as an asset acquisition should not assume that the valuation process is any less time-consuming and (or) extensive than that for a business combination. In other words, concluding that an asset acquisition has occurred (instead of a business combination) does not negate the need to determine the fair value of the assets acquired and liabilities assumed. While purchases of assets (or assets and liabilities [net assets]) that do not constitute a business are not accounted for using the acquisition method captured in ASC 805, authoritative guidance applicable to asset acquisitions is included in ASC If an entity buys assets (or assets and liabilities [net assets]) that do not constitute a business, the entity should account for that purchase as an asset acquisition. The key activities involved in accounting for an asset acquisition as of the acquisition date include: Recognize and measure assets (or net assets) acquired: - If the consideration surrendered is cash, measure the cost of the acquired assets (or net assets) using the amount of cash surrendered, which generally should include cash paid for acquisition costs - If consideration surrendered consists of noncash assets, liabilities and (or) equity, measure the cost of the acquired assets (or net assets) using the more clearly evident and more reliably measurable of: (a) the fair value of the consideration given (unless certain conditions applicable to nonmonetary transactions are met [refer to ASC ]) or (b) the fair value of the assets (or net assets) acquired - Allocate the cost of the assets (or net assets) acquired to the individual assets (or assets and liabilities) acquired using the relative fair values of these assets (or assets and liabilities) (including those assets that the acquirer does not intend to use or intends to use to a lesser degree than their highest and best use) Derecognize assets surrendered in the acquisition: - Recognize a gain or loss (unless certain conditions applicable to nonmonetary transactions are met [refer to ASC ]) if the fair value of noncash assets surrendered exceeds or is less than the carrying value of those assets Recognize liabilities incurred or equity issued in the acquisition Other applicable U.S. generally accepted accounting principles or accounting policies are used to subsequently account for the assets (or assets and liabilities) recognized in an asset acquisition. 8
9 Some of the more notable differences between this accounting and the accounting for a business combination include the following: Acquisition costs: Acquisition costs generally are included in the cost of the assets (or net assets) acquired in an asset acquisition. However, such costs are not included in the accounting for a business combination. In other words, such costs generally are expensed separately from the accounting for the business combination. Goodwill: No goodwill or gain from a bargain purchase results from the accounting for an asset acquisition. However, either goodwill or a gain from a bargain purchase almost always will result from the accounting for a business combination. Assembled workforce: In an asset acquisition, it may be appropriate to recognize an intangible asset for an assembled workforce. It is inappropriate to recognize such an intangible asset when accounting for a business combination. In-process research and development (IPR&D): An asset for IPR&D is only recognized in an asset acquisition if it has an alternative future use. However, an asset for IPR&D must be recognized at its fair value in the accounting for a business combination, regardless of whether it has an alternative future use. 9
10 This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services. This document does not constitute audit, tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein. RSM US LLP, its affiliates and related entities are not responsible for any loss resulting from or relating to reliance on this document by any person. Internal Revenue Service rules require us to inform you that this communication may be deemed a solicitation to provide tax services. This communication is being sent to individuals who have subscribed to receive it or who we believe would have an interest in the topics discussed. RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. RSM and the RSM logo are registered trademarks of RSM International Association. The power of being understood is a registered 10 trademark of RSM US LLP RSM US LLP. All Rights Reserved.
FASB Updates Business Definition
On January 5, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-01, s (Topic 805): Clarifying the Definition of a Business. This definition is significant
More informationIMPAIRMENT TESTING OF LONG-LIVED ASSETS TO BE HELD AND USED
IMPAIRMENT TESTING OF LONG-LIVED ASSETS TO BE HELD AND USED Prepared by: Rick Day, Partner, National Director of Accounting, RSM US LLP rick.day@rsmus.com, +1 563 888 4017 TABLE OF CONTENTS Introduction...
More informationLeases: Overview of the new guidance
Leases: Overview of the new guidance Prepared by: Richard Stuart, Partner, National Professional Standards Group, RSM US LLP richard.stuart@rsmus.com, +1 203 905 5027 March 2, 2016 Introduction On February
More informationImpact of lease accounting changes to corporate real estate
Impact of lease accounting changes to corporate real estate Overview In February 2016, the Financial Accounting Standards Board (FASB) issued its long-awaited revision to lease accounting Accounting Standards
More informationEXECUTIVE SUMMARY A GUIDE TO ACCOUNTING FOR BUSINESS COMBINATIONS
EXECUTIVE SUMMARY A GUIDE TO ACCOUNTING FOR BUSINESS COMBINATIONS This Executive Summary is part of RSM US LLP s A Guide to Accounting for Business Combinations and should be read in conjunction with that
More informationAcquisition of investment properties asset purchase or business combination?
Acquisition of investment properties asset purchase or business combination? Our IFRS Viewpoint series provides insights from our global IFRS team on applying IFRSs in challenging situations. Each edition
More informationNew Accounting Rules for Nonfinancial Asset Sales
On February 22, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-05, Other Income Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic
More informationIntangibles Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958)
Proposed Accounting Standards Update Issued: December 20, 2018 Comments Due: February 18, 2019 Intangibles Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities
More informationQuarterly financial reporting update
Quarterly financial reporting update March 2017 Please disable popup blocking software before viewing this webcast Original Publication Date: March 30, 2017 CPE Credit is not available for viewing archived
More informationAUDIT A GUIDE TO ACCOUNTING FOR BUSINESS COMBINATIONS. Third Edition
AUDIT A GUIDE TO ACCOUNTING FOR BUSINESS COMBINATIONS Third Edition A GUIDE TO ACCOUNTING FOR BUSINESS COMBINATIONS THIRD EDITION June 2016 A GUIDE TO ACCOUNTING FOR BUSINESS COMBINATIONS Prepared by:
More informationBusiness Combinations
Business Combinations Indian Accounting Standard (Ind AS) 103 Business Combinations Contents Paragraphs OBJECTIVE 1 SCOPE 2 IDENTIFYING A BUSINESS COMBINATION 3 THE ACQUISITION METHOD 4 53 Identifying
More informationPHILIPPINE INTERPRETATIONS COMMITTEE (PIC) QUESTIONS AND ANSWERS (Q&As)
PHILIPPINE INTERPRETATIONS COMMITTEE (PIC) QUESTIONS AND ANSWERS (Q&As) Q&A No. 2011 06 PFRS 3, Business Combinations (2008), and PAS 40, Investment Property Acquisition of investment properties asset
More informationFASB and IASB Continue Making Decisions on Lease Accounting
Accounting Journal Entry FASB and IASB Continue Making Decisions on Lease Accounting March 28, 2011 At recent meetings, the FASB and IASB (the boards ) have continued to make progress on the leases project,
More informationDeloitte & Touche LLP
695 East Main Street Stamford, CT 06901-2141 Tel: + 1 203 708 4000 Fax: + 1 203 708 4797 www.deloitte.com Ms. Susan M. Cosper Technical Director Financial Accounting Standards Board 401 Merritt 7 P.O.
More informationThe Impact of the New Revenue Standard on Real Estate Sales
The Impact of the New Revenue Standard on Real Estate Sales Wing W. Poon Montclair State University In May 2014, the FASB and the IASB jointly issued significantly revised standard on revenue recognition.
More informationRE: Proposed Accounting Standards Update, Leases (Topic 842): Targeted Improvements (File Reference No )
KPMG LLP Telephone +1 212 758 9700 345 Park Avenue Fax +1 212 758 9819 New York, N.Y. 10154-0102 Internet www.us.kpmg.com 401 Merritt 7 PO Box 5116 Norwalk, CT 06856-5116 RE: Proposed Accounting Standards
More informationA guide to. accounting for. Second Edition. Assurance Tax Consulting
A guide to accounting for Business Combinations Second Edition Assurance Tax Consulting A guide to accounting for Business Combinations Second Edition January 2012 This publication is provided as an information
More informationBuild-to-suit leases Issues In-Depth
Build-to-suit leases Issues In-Depth US GAAP February 2017 kpmg.com/us/frv member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. NDPPS 64108. Contents Navigating
More informationby Trevor Farber and Scott Streaser, Deloitte & Touche LLP FASB Accounting Standards Update No , Revenue From Contracts With Customers.
July 2, 2014 Volume 21, Issue 17 Heads Up In This Issue: Background Key Accounting Issues Effective Date and Transition Challenges for Entities That Account for Real Estate Transactions Thinking Ahead
More informationFrequently asked questions on business combinations
23 Frequently asked questions on business combinations This article aims to: Highlight some of the key examples discussed in the education material on Ind AS 103. Background Ind AS 103, Business Combinations
More informationTechnical Line FASB final guidance
No. 2016-03 31 March 2016 Technical Line FASB final guidance A closer look at the new leases standard The new leases standard requires lessees to recognize most leases on their balance sheets. What you
More informationReal estate project costs
Financial reporting developments A comprehensive guide Real estate project costs Revised June 2017 To our clients and other friends The guidance for real estate project costs is contained within ASC 970,
More informationTechnical Line FASB final guidance
No. 2018-08 20 September 2018 Technical Line FASB final guidance How the new leases standard affects engineering and construction entities In this issue: Overview... 1 Key considerations... 2 Scope and
More informationTechnical Line FASB final guidance
No. 2016-09 14 April 2016 Technical Line FASB final guidance How the FASB s new leases standard will affect health care entities In this issue: Overview... 1 Key considerations... 3 Scope and scope exceptions...
More informationDecember 13, delivery: To: Subject: File Reference No
Email delivery: To: director@fasb.org Subject: File Reference No. Technical Director File Reference No. Financial Accounting Standards Board 401 Merritt 7 PO Box 5116 Norwalk, CT 06856-5116 Ladies and
More informationGrant Thornton October Leases. Navigating the guidance in ASC 842
Grant Thornton October 2018 Leases Navigating the guidance in ASC 842 This publication was created for general information purposes, and does not constitute professional advice on facts and circumstances
More informationCenter for Plain English Accounting AICPA s National A&A Resource Center available exclusively to PCPS members
Report April 19, 2017 Center for Plain English Accounting AICPA s National A&A Resource Center available exclusively to PCPS members Sale-Leaseback Transactions Involving Real Estate Navigating the Twists
More informationCenter for Plain English Accounting AICPA s National A&A Resource Center available exclusively to PCPS members
REPORT February 22, 2017 Center for Plain English Accounting AICPA s National A&A Resource Center available exclusively to PCPS members ASU 2017-04: Goodwill Simplifications Implementation Considerations
More informationTechnical Line FASB final guidance
No. 2018-18 13 December 2018 Technical Line FASB final guidance How the new leases standard affects life sciences entities In this issue: Overview... 1 Key considerations... 2 Scope and scope exceptions...
More informationTopic 842 Technical Corrections Summary of Comments Received
Contact(s) David Hoyer Co-Author Ext. 462 Andy Bologna Co-Author Ext. 356 Thomas Faineteau Co-Author Ext. 362 Chris Roberge Co-Author Ext. 274 Amy Park Co-Author Ext. 476 Shayne Kuhaneck Assistant Director
More informationTechnical Line FASB final guidance
No. 2019-01 3 January 2019 Technical Line FASB final guidance How the new leases standard affects automotive entities In this issue: Overview... 1 Recent standard setting activity... 2 Key considerations...
More informationroots The Substance of the Standard Contents Changes to the Accounting for Goodwill for Private Companies
The Substance of the Standard MAYER HOFFMAN MCCANN P.C. AN INDEPENDENT CPA FIRM TM A publication of the Professional Standards Group February 2014 Changes to the Accounting for Goodwill for Private Companies
More informationApplying IFRS for the real estate industry
www.pwc.co.uk Applying IFRS for the real estate industry 12 December 2018 Contents Introduction to applying IFRS for the real estate industry 1 1. Real estate value chain 2 1.1. Overview of the investment
More informationFinancial Accounting Series
Financial Accounting Series NO. 221-C JUNE 2001 Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets Financial Accounting Standards Board of the Financial Accounting
More informationThe joint leases project change is coming
No. 2010-4 18 June 2010 Technical Line Technical guidance on standards and practice issues The joint leases project change is coming What you need to know The proposed changes to the accounting for leases
More informationGASB 69: Government Combinations
GASB 69: Government Combinations Table of Contents EXECUTIVE SUMMARY... 3 BACKGROUND... 3 KEY PROVISIONS... 3 OVERVIEW & SCOPE... 3 MERGER & TRANSFER OF OPERATIONS... 4 Mergers... 4 Transfers of Operations...
More information2018 Accounting & Auditing Update P R E S E N T E D B Y : D A N I E L L E Z I M M E R M A N & A N D R E A S A R T I N
2018 Accounting & Auditing Update P R E S E N T E D B Y : D A N I E L L E Z I M M E R M A N & A N D R E A S A R T I N AGENDA Leases FASB & GASB Revenue Recognition FASB 2 FASB ASU 2016-02, Leases (Topic
More informationExecutive Summary. New leases standard Lessees
Executive Summary December 2018 The new leases standard focuses on increased transparency and comparability providing financial statement users with more information about an entity s leasing activities.
More informationEN Official Journal of the European Union L 320/373
29.11.2008 EN Official Journal of the European Union L 320/373 INTERNATIONAL FINANCIAL REPORTING STANDARD 3 Business combinations OBJECTIVE 1 The objective of this IFRS is to specify the financial reporting
More informationTechnical Line FASB final guidance
No. 2017-17 29 June 2017 Technical Line FASB final guidance How the new revenue standard affects operating real estate entities In this issue: Overview... 1 Real estate sales... 2 Property management services...
More informationSri Lanka Accounting Standard LKAS 40. Investment Property
Sri Lanka Accounting Standard LKAS 40 Investment Property LKAS 40 CONTENTS SRI LANKA ACCOUNTING STANDARD LKAS 40 INVESTMENT PROPERTY paragraphs OBJECTIVE 1 SCOPE 2 DEFINITIONS 5 CLASSIFICATION OF PROPERTY
More informationPurchase Price Allocations ASC 805 Business Combinations
Purchase Price Allocations Introduction Mergers, acquisitions, and other business transactions have numerous accounting and tax implications. Buyers generally identify and report the fair values of the
More informationReal estate project costs
Financial reporting developments A comprehensive guide Real estate project costs Revised December 2018 To our clients and other friends The guidance for real estate project costs is contained within Accounting
More informationImpairment or disposal of longlived
Financial reporting developments A comprehensive guide Impairment or disposal of longlived assets Revised December 2017 To our clients and other friends ASC 360-10, Impairment and Disposal of Long-Lived
More informationIntangibles Goodwill and Other (Topic 350)
Proposed Accounting Standards Update Issued: October 6, 2010 Comments Due: November 5, 2010 Intangibles Goodwill and Other (Topic 350) How the Carrying Amount of a Reporting Unit Should Be Calculated When
More informationDefining Issues February 2013, No. 13-8
Issues & Trends Defining Issues February 2013, No. 13-8 Revenue Recognition: Boards Decide Scope and Industry-Specific Issues At their January 2013 meeting, the FASB and IASB (the Boards) made tentative
More informationNew Developments Summary
October 3, 2017 NDS 2017-05 New Developments Summary Leases redefined New leasing standard puts greater pressure on lease identification for lessees Summary As companies progress toward implementing the
More informationTechnical Line FASB final guidance
No. 2018-15 6 December 2018 Technical Line FASB final guidance How the new leases standard affects consumer products and retail entities In this issue: Overview... 1 Recent standard-setting activity...
More informationComment on the Exposure Draft Leases
15 December 2010 International Accounting Standards Board 30 Cannon Street London EC4M 6XH United Kingdom Financial Accounting Standards Board 401 Merritt 7 PO Box 5116 Norwalk CT 06856-5116 United States
More informationBusiness Combinations
International Financial Reporting Standard 3 Business Combinations This version was issued in January 2008. Its effective date is 1 July 2009. It includes amendments resulting from IFRSs issued up to 31
More informationTechnical Corrections and Improvements to Recently Issued Standards
Two Proposed Accounting Standards Updates Issued: September 27, 2017 Comments Due: November 13, 2017 Technical Corrections and Improvements to Recently Issued Standards I. Accounting Standards Update No.
More informationThe new accounting standard for leases. 27 March 2017
The new accounting standard for leases 27 March 2017 Disclaimer Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity.
More informationTechnical Line FASB final guidance
No. 2018-10 11 October 2018 Technical Line FASB final guidance How the new leases standard affects airlines In this issue: Overview... 1 Key considerations... 2 Scope and scope exceptions... 2 Definition
More informationFASB Update. FASB Exempts Private Companies from Variable Interest Entity Guidance Affects: Private Companies
FASB Update New Guidance Raises the Threshold for Discontinued Operations On April 10, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,
More informationTechnical Line FASB final guidance
No. 2016-11 14 April 2016 Technical Line FASB final guidance How the FASB s new leases standard will affect real estate entities In this issue: Overview... 1 Key considerations... 2 Scope and scope exceptions...
More informationFASB Emerging Issues Task Force
EITF Issue No. 03-17 FASB Emerging Issues Task Force Issue No. 03-17 Title: Subsequent Accounting for Executory Contracts That Have Been Recognized on an Entity's Balance Sheet Document: Issue Summary
More informationSomething Borrowed, Something New Get Ready for the New Lease Accounting Standard
April 2016 Something Borrowed, Something New Get Ready for the New Lease Accounting Standard By Scott G. Lehman, CPA, and David E. Wentzel, CPA Audit / Tax / Advisory / Risk / Performance Smart decisions.
More informationNew leases standard ASC 842 Lessee - operating leases. Itai Gotlieb, Partner, Professional Practice July 2017
ASC 842 Lessee - operating leases Itai Gotlieb, Partner, Professional Practice July 2017 Overview Under Accounting Standards Codification (ASC) 842, Leases, lessees recognize assets and liabilities for
More informationThe Substance of the Standard
The Substance of the Standard Mayer Hoffman McCann P.C. An Independent CPA Firm TM A publication of the Professional Standards Group April 2014 Accounting Election for Common Control Leasing Arrangements
More informationHeads Up. FASB Draws a Bright Line Through Operating Leases Proposed ASU Revamps Lease. Accounting. The ED, released by the FASB as a proposed
August 17, 2010 Volume 17, Issue 27 Heads Up In This Issue: Background Effective Date In a Nutshell Scope Lessee Accounting Lessor Accounting Presentation and Disclosures Transition The ED, released by
More informationWhile we generally support the FASB s conclusions on the leases project, we have comments on the following topics:
July 2, 2015 Ms. Susan M. Cosper, Technical Director Financial Accounting Standards Board 401 Merritt 7 P.O. Box 5116 Norwalk, CT 06856-5116 Subject: Lease Accounting Project Dear Sue: The Financial Reporting
More informationFinancial Accounting Standards Committee
Statement of Financial Accounting Standards No. 37 20 July 2006 Translated by Chi-Chun Liu, Professor (National Taiwan University) Financial Accounting Standards Committee -605- -606- Statement of Financial
More informationIn December 2003 the Board issued a revised IAS 40 as part of its initial agenda of technical projects.
IAS 40 Investment Property In April 2001 the International Accounting Standards Board (the Board) adopted IAS 40 Investment Property, which had originally been issued by the International Accounting Standards
More informationApplying IFRS. A closer look at the new leases standard. August 2016
Applying IFRS A closer look at the new leases standard August 2016 Contents Overview 3 1. Scope and scope exceptions 5 1.1 General 5 1.2 Determining whether an arrangement contains a lease 6 1.3 Identifying
More informationApplying IFRS for the real estate industry
www.pwc.co.uk Applying IFRS for the real estate industry November 2017 Contents Introduction to applying IFRS for the real estate industry 1 1. Real estate value chain 2 1.1. Overview of the investment
More informationLease accounting scope & impacts
Leasing Lease accounting scope & impacts Scope What s in? All industries, all entities Arrangements that meet the definition of a lease Embedded leases within other arrangements What s out? Leases of:
More informationORIGINAL PRONOUNCEMENTS
Financial Accounting Standards Board ORIGINAL PRONOUNCEMENTS AS AMENDED Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets Copyright 2008 by Financial Accounting Standards
More informationTechnical Line SEC staff guidance
No. 2013-20 Updated 27 August 2015 Technical Line SEC staff guidance How to apply S-X Rule 3-14 to real estate acquisitions In this issue: Overview... 1 Applicability of Rule 3-14... 2 Measuring significance...
More informationFile Reference No Re: Proposed Accounting Standards Update, Leases (Topic 842): Targeted Improvements
Deloitte & Touche LLP 695 East Main Street Stamford, CT 06901-2141 Tel: + 1 203 708 4000 Fax: + 1 203 708 4797 www.deloitte.com Ms. Susan M. Cosper Technical Director Financial Accounting Standards Board
More informationTransfers and servicing of financial assets
Financial reporting developments A comprehensive guide Transfers and servicing of financial assets Revised July 2017 To our clients and other friends We are pleased to provide you with the latest edition
More information.01 The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements.
COMPARISON OF GRAP 16 WITH IAS 40 GRAP 16 IAS 40 DIFFERENCES Objective.01 The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements.
More informationIn February 2016, FASB issued Accounting Standards. An Analysis of the New Sale and Leaseback Guidance. DEPARTMENTS I Accounting.
An Analysis of the New Sale and Leaseback Guidance By Josef Rashty In February 2016, FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). Topic 842 will supersede the existing lease
More informationFinancial reporting developments. A comprehensive guide. Lease accounting. Accounting Standards Codification 842, Leases.
Financial reporting developments A comprehensive guide Lease accounting Accounting Standards Codification 842, Leases October 2018 To our clients and other friends Accounting Standard Codification (ASC)
More informationEdison Electric Institute and American Gas Association New Lease Standard
Edison Electric Institute and American Gas Association New Lease Standard May 16, 2016 Disclaimer The information contained herein is of a general nature and is not intended to address the circumstances
More informationREAL ESTATE PERSPECTIVE ON NEW LEASE ACCOUNTING STANDARDS
VALUATION & ADVISORY REAL ESTATE PERSPECTIVE ON NEW LEASE ACCOUNTING STANDARDS BY JOHN CORBETT, MAI, ASA, FRICS AND MARC R. SHAPIRO, MAI, MRICS INTRODUCTION The Financial Accounting Standards Board (FASB)
More informationINSIGHTS. The Timing and Measurement of Recognizing Revenue Under Topic 606. August 2017
INSIGHTS The Timing and Measurement of Recognizing Revenue Under Topic 606 August 2017 1 Recognizing Revenue under Topic 606 This publication is the second in a series of discussing the implementation
More informationLEASES: NEW ACCOUNTING REQUIREMENTS FOR LESSEES
Prepared by: Richard Stuart, Partner, National Professional Standards Group, RSM US LLP richard.stuart@rsmus.com, +1 203 905 5027 Contributions by: Teresa Dimattia, Senior Director, National Professional
More information4/4/2018. GASB's New Leases Standard
GASB's New Leases Standard April 4, 2018 1 TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form
More informationFinancial reporting developments. A comprehensive guide. Lease accounting. Accounting Standards Codification 842, Leases.
Financial reporting developments A comprehensive guide Lease accounting Accounting Standards Codification 842, Leases January 2019 To our clients and other friends Accounting Standard Codification (ASC)
More informationIFRS Training. IAS 38 Intangible Assets. Professional Advisory Services
IFRS Training IAS 38 Intangible Assets Table of Contents Section 1 Overview 2 Introduction to Intangible Assets 3 Recognition and Initial Measurement 4 Internally Generated Intangible Assets 5 Measurement
More informationDear members of the International Accounting Standards Board,
International Accounting Standards Board 30 Cannon Street London EC4M 6XH United Kingdom Our ref : IASB 442 D Direct dial : (+31) 20 301 0391 Date : Amsterdam, 10 September 2013 Re : Comment on Exposure
More informationReal estate sales. Financial reporting developments. Accounting Standards Codification (prior to the adoption of ASU )
Financial reporting developments A comprehensive guide Real estate sales Accounting Standards Codification 360-20 (prior to the adoption of ASU 2014-09) Revised September 2017 To our clients and other
More informationThe entity that obtains control of the acquiree. The business or businesses that the acquirer obtains control of in a business combination.
IFRS 3 IFRS 3 Business Combination INTRODUCTION Background DEFINITIONS Business combination Business Acquisition date Acquirer Acquiree IFRS 3 Business Combinations outlines the accounting when an acquirer
More informationRevenue: Real estate Q&As
Revenue: Real estate Q&As US GAAP January 2019 kpmg.com/us/frv Contents Foreword... 1 About this publication.. 2 Executive summary. 3 A. Scope.. 8 B. Step 1: Identify the contract... 29 C. Step 2: Identify
More informationIn December 2003 the IASB issued a revised IAS 40 as part of its initial agenda of technical projects.
International Accounting Standard 40 Investment Property In April 2001 the International Accounting Standards Board (IASB) adopted IAS 40 Investment Property, which had originally been issued by the International
More informationRe: FASB Exposure Draft, Proposed Statement of Financial Accounting Standards, "Business Combinations, a replacement of FASB Statement No.
Letter of Comment No: lo%" File Reference: 1204-001 October 28, 2005 Mr. Robert Herz Chairman Financial Accounting Standards Board 40 I Merritt 7 P.O. Box 5116 Norwalk, CT 06856-5116 File Reference No.
More informationProposed FASB Staff Position No. 142-d, Amortization and Impairment of Acquired Renewable Intangible Assets (FSP 142-d)
Financial Reporting Advisors, LLC 100 North LaSalle Street, Suite 2215 Chicago, Illinois 60602 312.345.9101 www.finra.com Mr. Lawrence W. Smith Director - Technical Application and Implementation Activities
More informationIn December 2003 the Board issued a revised IAS 40 as part of its initial agenda of technical projects.
IAS Standard 40 Investment Property In April 2001 the International Accounting Standards Board (the Board) adopted IAS 40 Investment Property, which had originally been issued by the International Accounting
More informationReal Estate Accounting
Real Estate Accounting Steven M. Bragg Chapter 1 Introduction to Accounting... 1 Learning Objectives... 1 Introduction... 1 Financial Accounting Basics... 1 Accounting Frameworks... 2 The Accounting Cycle...
More informationRE: Proposed Accounting Standards Update, Land Easement Practical Expedient for Transition to Topic 842 (File Reference No.
KPMG LLP Telephone +1 212 758 9700 345 Park Avenue Fax +1 212 758 9819 New York, N.Y. 10154-0102 Internet www.us.kpmg.com Technical Director 401 Merritt 7 PO Box 5116 Norwalk, CT 06856-5116 RE: Proposed
More informationLeases (Topic 842) No January Land Easement Practical Expedient for Transition to Topic 842
No. 2018-01 January 2018 Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic 842 An Amendment of the FASB Accounting Standards Codification The FASB Accounting Standards Codification
More informationThis article is relevant to the Diploma in International Financial Reporting and ACCA Qualification Papers F7 and P2
REVENUE RECOGNITION This article is relevant to the Diploma in International Financial Reporting and ACCA Qualification Papers F7 and P2 For almost all entities other than financial institutions, revenue
More informationASSURANCE AND ACCOUNTING ASPE - IFRS: A Comparison Investment Property
ASSURANCE AND ACCOUNTING ASPE - IFRS: A Comparison Investment Property In this publication we will examine the key differences between Accounting Standards for Private Enterprises (ASPE) and International
More informationImportant Comments I. Request concerning the proposed new standard in general 1.1 The lessee accounting proposed in the discussion paper is extremely
Important Comments I. Request concerning the proposed new standard in general 1.1 The lessee accounting proposed in the discussion paper is extremely complicated. As such, the introduction of the new standard
More informationJune 28, Technical Director File Reference No Financial Accounting Standards Board 401 Merritt 7 P.O. Box 5116 Norwalk, CT
Technical Director File Reference No. 2016-200 401 Merritt 7 P.O. Box 5116 Norwalk, CT 06856-5116 Comments by the Edison Electric Institute and the American Gas Association Regarding the Accounting for
More informationFSA Faculty Consortium Technical Accounting Update. Bob Uhl, partner, Deloitte & Touche LLP
FSA Faculty Consortium Technical Accounting Update Bob Uhl, partner, Deloitte & Touche LLP Deloitte University May 30, 2014 Acronyms Acronym ASC ASU ED FASB IASB IFRS U.S. GAAP Full Form Accounting Standards
More informationHONG KONG SOCIETY OF ACCOUNTANTS. Financial Accounting Standards Committee. Urgent Issues & Interpretations Sub-Committee
HONG KONG SOCIETY OF ACCOUNTANTS Financial Accounting Standards Committee Urgent Issues & Interpretations Sub-Committee Interpretation 12 Business combinations - Subsequent adjustment of fair values and
More informationLease & Finance Accountants Conference. September The Westin Charlotte Charlotte, NC
Lease & Finance Accountants Conference September 11-13 The Westin Charlotte Charlotte, NC H A N D O U T S Lessor Accounting under ASC 842 EQUIPMENT LEASING AND FINANCE ASSOCIATION Presenters Rod Hurd Chief
More informationFASB Emerging Issues Task Force
EITF Issue No. 09-4 FASB Emerging Issues Task Force Issue No. 09-4 Title: Seller Accounting for Contingent Consideration Document: Issue Summary No. 1, Supplement No. 1 Date prepared: August 21, 2009 FASB
More informationPreparing for the new lease accounting standard What transportation, hospitality, and services companies need to know
Preparing for the new lease accounting standard What transportation, hospitality, and services companies need to know Preface 1 2 3 4 5 6 7 8 The new lease accounting standard is expected to have a significant
More information