Defining Issue| January 2017

FASB clarifies the definition of a business

KPMG reports on ASU 2017-01, which revises ASC 805 as part of FASB’s definition of a business project. The ASU sets out a new framework for classifying transactions as acquisitions (disposals) of assets vs. businesses.


ASU 2017-01

  • A company with acquisition or disposal transactions

Relevant dates

Mandatory effective dates and early adoption provisions:

Effective date:


Annual periods – Fiscal years beginning after

Interim periods – In fiscal years beginning after

Public business entities and certain not-for-profit entities

Dec. 15, 2017

Dec. 15, 2017

All other entities

Dec. 15, 2018

Dec. 15, 2019

Early adoption allowed?

Yes – immediately for transactions that have not been reported in financial statements that have been issued or made available for issuance.

Key impacts

  • An integrated set of activities and assets (a set) is a business if it has, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs
  • ASU 2017-01 creates a 2-step method in assessing whether a transaction is an acquisition/disposal of assets or a business
  • Fewer transactions are expected to involve acquiring or selling a business
  • Real estate and life science industries will likely be most affected

Report contents

  • Why does the definition of a business matter?
  • Examples that illustrate the definition
  • Effective dates and transition
  • FASB’s next steps

Related content: 

Handbook: Accounting for business combinations and noncontrolling interests

Issues In-Depth: Definition of a business



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