By Eva Lang - On December 4, 2007, the Financial Accounting Standards Board (FASB) issued FASB Statements No. 141 (revised 2007), Business Combinations. According to FASB, “Statement 141(R) improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. To achieve this goal, the new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination.” The revision of 141 is part of the FASB's push toward "fair value," or mark-to market accounting.
Financial Week (December 10, 2007) reports that Dennis Beresford, a former FASB chairman now serving on a Securities and Exchange Commission advisory committee that is studying the U.S. financial reporting system says “The rules will be difficult to apply and will require companies and analysts to relearn a lot of things.” The article goes on to say that the revisions to 141 “essentially extend the fair-value requirements to new areas. That will increase the valuation work required of corporate finance departments, and in some cases jack up the volatility of reported earnings as various assets and liabilities are marked to market.”