Defining Issues | March 2021

 

Insight

FASB proposes business combination amendments

KPMG reports on proposed changes to accounting for revenue contracts acquired in a business combination.

Nick Burgmeier

Nick Burgmeier

Partner, Dept. of Professional Practice, KPMG US

+1 212-909-5455

The proposed amendments would require an acquirer to recognize and measure contract assets and contract liabilities in a business combination based on the guidance of ASC 606 rather than fair value.

Applicability

  • All entities that acquire a business after the adoption of Topic 606

Relevant dates

  • December 15, 2020 – Proposed ASU issued
  • March 15, 2021 – Comments due

Key impacts

Would require entities to use principles in ASC 606 to recognize and measure contract assets and liabilities in revenue contracts acquired in a business combination rather than fair value.

Would not change the requirements to recognize and measure, at fair value, other customer-contract intangibles – e.g. backlog intangible, favorable contract intangible, unfavorable contract liability.

Related content

Handbook: Business Combinations 

Handbook: Revenue Recognition

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