FASB proposes business combination amendments

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