From the Thomson Reuters Tax & Accounting CPE Training newsletter:
Business Combinations and Consolidated Financial Instruments: New Guidance from the FASB
The FASB has recently issued two new statements SFAS 141 (R), Business Combinations, and SFAS 160, Noncontrolling Interests in Consolidated Financial Instruments. These two statements will be critical to many future engagements since they include additional disclosure requirements and amend or nullify numerous other pronouncements. The good news is that both statements are not effective until years beginning after December 31, 2008 with early adoption prohibited.
SFAS 141 (R) – Business Combinations
This standard applies to those transactions or events where an entity obtains control of one or more businesses. While the scope of the Statement includes buinsess entities, including mutual entities, it excludes combinations between or by non-profit organizations. The Statement:
• Replaces SFAS 141 by the same name.
• Uses the term acquisition method in place of the term purchase method.
• Generally requires that acquirers recognize assets acquired, liabilities assumed, and noncontrolling interest at fair value.
• Among other things, it changes the accounting for acquisition-related costs, step acquisitions, contingencies recognition and measurement of goodwill, and bargain purchased.
SFAS 160 – Noncontrolling Interests in Consolidated Financial Instruments
This standard addresses the so-called minority interests and amends ARB 51, Consolidated Financial Instruments. In addition to other matters, the Statement provides requirements for the presentation, identification, and labeling of noncontrolling interests on the balance sheet and income statement. It also addresses the accounting for changes in a parent’s ownership in a subsidiary and the deconsolidation of subsidiaries. The Statement applies to entities that prepare consolidated financial statements, but do not apply to nonprofit entities.
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