FASB issues business combination amendments

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

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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