Defining Issues | October 2021

 

Insight

FASB issues business combination amendments

KPMG reports on 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 amendments 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 ASC 606

Relevant dates

Effective date Public entities All other entities

Annual periods – Fiscal years beginning after       

December 15, 2022

December 15, 2023

Interim periods – In fiscal years beginning after 

December 15, 2022

December 15, 2023

Early adoption allowed in fiscal years beginning after

Immediately

Immediately

 

Key impacts

  • Requires 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.
  • Does 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.
  • Early adoption is permitted, including adoption in an interim period. If early adopted early, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption.

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