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INTRODUCTION
The PASB has issued Statement of Financial Accounting Standards (SFAS) No. 141(R), Business Combinations, which will replace SFAS No. 141 of the same title. SFAS No. 141(R) retains the fundamental requirements of its predecessor that the purchase method be applied to all business combinations; note that, in SFAS No. 141(R), the purchase method is referred to as the acquisition method. Major changes from the previous standard include the following:
* The date on which the acquirer obtains control of the acquiree has been definitively established as the acquisition date.
* While SFAS No. 141 provides guidance for identifying the acquirer, it does not explicitly define the acquirer; SFAS No. 141 (R) defines the acquirer in a business combination as the entity that obtains control of the acquiree.
* SFAS No. 141 applies only to business combinations in which control is obtained through the transfer of consideration, whereas SFAS No. 141 (R) applies to all business combinations, including those in which control is obtained without the transfer of consideration.
SFAS No. 141(R), with limited exceptions, requires assets acquired and liabilities assumed to be recognized at their fair values; that requirement replaces the so-called cost-allocation process in SFAS No. 141, under which the cost of an acquisition is allocated to individual assets and liabilities based on estimated fair values. Application of cost allocation often resulted in the measurement of some assets acquired and liabilities assumed at amounts other than fair value.
* Whereas, pursuant to SFAS No. 141, costs incurred to effect the business combination are included in the allocated cost, SFAS No. 141(R) requires acquisition-related costs to be recognized separately from the acquisition.
* Under SFAS No. 141, restructuring costs the acquirer expected (but was not obligated) to incur are recognized as if they are a liability assumed at the acquisition date; under SFAS 141(R), such costs are recognized separately from the acquisition.
* SFAS No. 141 does not provide guidance with respect to the measurement of the noncontrolling interest (previously referred to as the minority interest) at the date of acquisition; SFAS 141 (R) requires the noncontrolling interest to be measured at fair value.
* Pursuant to SFAS No. 141, goodwill recognized on the date of acquisition represents only the amount attributable to...