FASB has published a proposed Accounting Standards Update (ASU) intended to improve the requirements for identifying the accounting acquirer in FASB Accounting Standards Codification® Topic 805, Business Combinations. The proposed 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, which can affect the combined entity’s post-transaction net income. The proposed ASU would establish more consistent requirements for determining the accounting acquirer when a business is acquired in a transaction achieved by exchanging equity interests. 

The proposal would more closely align the requirements for determining the accounting acquirer in the acquisition of a variable interest entity (VIE) with the current requirements that apply to transactions that do not involve a VIE. 

The proposal is expected to enhance financial statement comparability by providing consistent requirements for economically similar transactions. 

Stakeholders are encouraged to review and provide input on the proposed ASU by Dec. 16, 2024.