The FASB recently updated the definition of a business, but this is more than just an update to the codification glossary. It raises the bar on what qualifies as a business and may have a pervasive impact on accounting for acquisitions, dispositions, and even consolidations. Watch John McKeever discuss the three key areas of change.
Hi, I’m John McKeever. The FASB recently updated the definition of a business.
But this is more than just an update to the codification glossary. The FASB has raised the bar on what qualifies as a business and this could have a pervasive impact on accounting for acquisitions, dispositions, and even consolidations.
The new guidance does three key things:
The changes will likely result in more transactions being accounted for as asset acquisitions, which do not result in goodwill. In addition, there are other differences, such as accounting for transaction costs.
While the FASB changed the definition of a business for financial reporting, the SEC’s definition remains the same for assessing the need for historical financial statements and pro forma information.
The standard is effective in 2018 for public company filings. However, it can be applied earlier, as long as the financial statements have not been issued.
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