FRF for SMEs--Business Combinations, Part 3
The following disclosures should be included in footnotes of the acquirer for each material business combination during the reporting period, as well as after the reporting date up to the date financial statements are issued.
- Name and description of the acquired entity.
- The date of acquisition.
- The percentage of voting equity interests obtained in the combination.
- The total consideration transferred at acquisition date market value and each major class of consideration such as cash, liabilities and type of equity interests.
- Descriptions of contingent consideration arrangements and indemnification assets and the basis for payments.
- A summary statement of financial position at the acquisition date presenting the recognized amounts of assets acquired and liabilities assumed.
- The amount of any gain on a bargain purchase and the line item in the statement of operations where it is included.
- The basis for determination, and the amount, of any non-controlling interest in the acquiree.
- Accounting policies for intangible assets acquired and amounts classified separately, along with their useful lives.
- When business combinations are achieved in stages, the acquisition-date market value of the acquiree held before the acquisition date and any market value re-measurement gain or loss, along with the line item in which it is reported.
- When immaterial business combinations occur that are material in the aggregate, disclosure similar to the above are required.
Combinations of Entities under Common Control
Such combinations may include transferring assets to a new entity, transfers from a subsidiary to a parent, transfers of a parent's partial interests in several entities to a new entity, formation of a limited liability company for entities under common control and other similar transfers.
Accounting policies include:
- The receiving entity should recognize the transferred assets and liabilities at the transfer date.
- The receiving entity should ordinarily account for the assets and liabilities at their transfer-date carrying amounts recorded by the transferring entity.
- The receiving entity should present its statement of financial position and its results of operations as though the transfer of net assets or exchange of equity interests occurred at the beginning of the period.
- Prior year comparative financial statements and other information should be retrospectively adjusted with appropriate disclosures.
- The footnotes of the receiving entity should disclose the name and description of the combined entity or entities and the method of accounting for the assets’ transfer or equity exchange.
My webcasts on the FRF for SMEs can be accessed by clicking on the link, Live Webcasts, on the left side of my home page, www.cpafirmsupport.com.
by Larry Perry, CPA, CPA Firm Support Services, LLC - Larry has over 40 years experience as a CPA practitioner, author of accounting and auditing manuals, author and presenter of live staff training seminars and author of webcast and self-study CPE programs. He is co-founder of CPA Firm Support Services, LLC (www.cpafirmsupport.com), an organization providing resources, training and consulting to smaller CPA firms. Larry writes a weekly blog on AccountingWEB.com focusing on small audits, reviews and compilations. He is currently developing documentation manuals and handbooks for small audits, reviews and compilations and related electronic practice aids.