In many M&A transactions, a buyer may acquire assets it does not intend to use. Prior to the M&A Standards**, buyers generally would assign little or no value to assets that are not intended to be used when accounting for an M&A transaction. Now, such assets are required to be recognized at fair value from a market participant perspective, even if that perspective differs from that of the actual buyer. As a result, buyers will need to consider how others might use these assets, as well as how these assets might benefit other assets acquired, or those they already own.
One common type of asset that a buyer does not intend to actively use that is receiving considerable attention is called a “defensive asset.” This edition of Mergers & acquisitions — a snapshot, focuses on some of the issues companies may face when initially recognizing, measuring and subsequently accounting for defensive assets.
* This snapshot, updated since its original issuance to reflect changes for, among other things, contacts and branding, contains guidance that remains relevant as of the publication date.
** Accounting Standards Codification 805 is the US standard on business combinations, Accounting Standards Codification 810 is the US standard on consolidation and noncontrolling interests (collectively the “M&A Standards”).
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