Business Combinations (ASC Topic 805 and IFRS 3R)

Under the guidance of ASC Topic 805, companies must measure fair values of the following at their acquisition-date:

  • Identifiable assets acquired
  • Liabilities assumed
  • Any non-controlling interest in the acquiree

In addition, under US GAAP and tax regulations, acquired assets and assumed liabilities are not limited to those previously recognized by the acquiree. Certain assets and liabilities that were not previously recognized by an acquiree must be recognized by an acquirer as of the transaction closing. These typically include any intangible assets that were internally developed (not previously purchased) by the acquiree.

Assets and Liabilities

Business combinations involve all classes of tangible assets, intangible assets, and liabilities, including but not limited to the following:

Real Property




Leasehold Interest

Personal Property and Related Assets

Machinery and Equipment

Furniture and Fixtures

Computer Equipment


Construction in Progress

Leasehold Improvements

Intangible Assets


Technology (Patented and Unpatented)

Internally Developed Software

Customer Relationships

Favorable Supply Agreements

Non-Compete Agreements

Licensing Agreements


Deferred Revenue

Contingent Considerations

Contingent Liabilities

ASC 805 introduced significant changes over previous financial reporting standards, including changes in accounting for:

  • Transaction and restructuring costs

  • Contingent consideration
  • Contingent liabilities, including earn-outs
  • Negative goodwill (bargain purchases)
  • In-process research and development