Unraveling new business combination standards

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The Financial Accounting Standards Board (FASB) issued two new accounting pronouncements to make company information on M&A activity more relevant to stakeholders. FAS 141 (R), Business Combinations; and FAS 160, Non-controlling Interests in Consolidated Financial Statements, change the accounting, disclosure, and planning for business combination transactions.

Although focused on business combinations, the standards also change accounting and financial reporting procedures that affect all companies, regardless of whether they are participating in M&A activity. Both accounting pronouncements are effective for fiscal years beginning on or after December 15, 2008.

These two business combination standards change how equity is reported and could result in lower bonding amounts; reduced lending from financial institutions; and diminished bidding capacity for construction contractors already facing a difficult credit and surety environment.

Unraveling new business combination standards,provides an in-depth discussion of how the FASB standards affect future M&A activity, financial reporting, the credit and surety environment, existing contractual arrangements, and income taxes.