The FASB amended its standard for business combinations and gave acquiring companies more flexibility in determining how newly acquired businesses will value their balance sheets. Acquired companies have the option to have the accounting basis used by their new parents "pushed down" onto their financial statements after the deal has closed.
The FASB issued Accounting Standards Update (ASU) No. 2014-17, Business Combinations (Topic 805): Pushdown Accounting (a Consensus of the FASB Emerging Issues Task Force), on November 18, 2014, to provide guidance for newly acquired businesses and organizations that prepare financial statements separately from their parents.
The amendments are effective immediately, the FASB said. The revisions to FASB ASC 805, Business Combinations, give acquired companies the option to have the accounting basis used by their new parents "pushed down" onto their financial statements after the deal has closed.
In a related move, the SEC published Staff Accounting Bulletin (SAB) No. 115, to remove the guidance in SAB Topic 5.J New Basis of Accounting Required in Certain Circumstances.
The FASB amendments apply to the separate financial statements of an a business or not-for-profit activity after it's been acquired.
ASU No. 2014-17 establishes criteria for newly acquired businesses in determining the extent to which their financial statements should reflect the accounting basis used by their parents.
The FASB approved the changes in October following a September decision by its Emerging Issues Task Force (EITF).
SAB Topic 5.J and EITF Topic No. D-97, "Push-Down Accounting," (FASB ASC 805-50-S99), apply to acquirers, but there was no guidance for the companies being acquired, and the EITF agreed to the amendments to address the inconsistency in the way newly acquired businesses handled their financial reporting.
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