GROUP RESEARCH PROJECT #1
FASB RESEARCH – CHAPTER 1 ISSUES

#1 In recording a business combination, the acquiring company must recognize all identifiable intangible assets of the acquired company. This process can be complex and burdensome. Recently, the Private Company Council (PCC)* provided relief from some of these requirements for private (non-public) companies.

What was that “relief” and what document was issued that provided it?

*PCC is an arm of the FASB that is tasked with proposing amendments to GAAP that would apply only to private (non-public companies).

#1) According to the Accounting Standards Update 2014-18, Business Combinations (Topic 805), private companies should no longer “recognize separately from goodwill (1) customer-related intangible assets unless they are capable of being sold or licensed independently from the other assets of the business and (2) noncompetition agreements.” This will cut down the complexity and cost while still providing interested parties with information to make decisions off of.

#2 As we saw near the end of Chapter 1, the annual testing for impairment of indefinite life intangibles (such as goodwill) is VERY complicated (very quantitative) and time consuming. A few years ago, the FASB provided a ”qualitative” alternative to the annual impairment test.

Briefly describe that alternative and what document was issued that allowed that alternative?

#2) This amendment allows companies use a qualitative measurement of goodwill to determine whether or not it is necessary to perform a quantitative impairment test. The document issued pertaining to this is the Accounting Standards Update No. 2012-02—Intangibles—Goodwill and Other (Topic 350).

#3 Slide #75 in the Chapter 1 slides discusses the accounting for a “bargain purchase” of another company.

What is the paragraph in the FASB Codification that outlines that accounting treatment?

#3) 805-30-25-2

#4 Slide #65 in the Chapter 1 slides discusses the accounting for “contingent consideration” in a business acquisition.

What is the paragraph in the FASB Codification that outlines that accounting treatment?

#4) 805-30-35-1

#5 Slide #90 in the Chapter 1 slides discusses the “measurement period” in which acquiring companies can make adjustments to the amounts recorded in an acquisition.

What is the paragraph in the FASB Codification that outlines that accounting treatment?

#5) The paragraph in the FASB Codification that outlines the “measurement period” is 805-10-25-15.

BONUS QUESTION (in case you miss one of the above)….the FASB has a project to reconsider one aspect of these “measurement period adjustments”. What is that?

Bonus) The Board affirmed the proposal that an acquirer should recognize adjustments to provisional amounts in the reporting period in which the adjustment amount is determined and recognize the effects of changes in depreciation, amortization, or other income effects arising from changes to the provisional amounts, if any, in the income statement in the reporting period in which the adjustment to the provisional amount is determined.