The new definition of a business

Effective dates

Mandatory effective dates and early adoption provisions:

Annual periods:

For public business entities the effective date for annual periods is the fiscal years beginning after Dec. 15, 2017.

For all other entites the effective date for annual periods is the fiscal years beginning after Dec. 15, 2018.

Interim periods

For public business entities the effective date for interim periods is the fiscal years beginning after Dec. 15, 2017.

For all other entites the effective date for interim periods is the fiscal years beginning after Dec. 15, 2019.

Early adoption allowed?

Yes.

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 to assess whether a transaction is an acquisition/disposal of assets or a business
• Fewer transactions are expected to qualify as acquisitions or disposals of a business
• The ASU likely affects the real estate and life science industries most

Report contents

• A new definition
• Inputs, processes and outputs
• Determining what is a part of the set
• Step 1 – Screening test
• Step 2 – Evaluate whether an input and a substantive process exist
• Acquired set with no outputs
• Acquired set with outputs
• Examples

Related content

Handbook: Accounting for business combinations and noncontrolling interests

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