FASB issues standard clarifying guidance for identifying the accounting acquirer in a business combination

FASB has published an Accounting Standards Update (ASU) that improves the requirements for identifying the accounting acquirer in FASB Accounting Standards Codification® Topic 805, Business Combinations. The ASU is based on a recommendation of the Emerging Issues Task Force (EITF). 

In a business combination, the determination of the accounting acquirer can significantly affect the carrying amounts of the combined entity’s assets and liabilities. 

The ASU will revise current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity that meets the definition of a business. The amendments require an entity to consider the same factors that are currently required for determining which entity is the accounting acquirer in other acquisition transactions.