In an economic environment where many companies are buying and selling portions of businesses, the M&A Standards** have an impact on how companies account for these types of transactions. At first glance, the fundamental concept of “control” that drives the accounting seems easy to understand. If a company gains control, the acquisition is a business combination. If a company loses control, it deconsolidates the subsidiary. If a company maintains control, the transaction is recorded in equity. Simple, right? Not so fast!
This edition of Mergers & Acquisitions — A snapshot will discuss several intricacies in the M&A Standards relating to the accounting for partial acquisitions and disposals that may impact how companies report financial results and communicate to shareholders.
* 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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