Business Combinations - Steps to Accounting for the Transaction  

Mergers, acquisitions, and other types of business combinations are a common strategy among companies to grow their businesses or diversify their risk. Entering into business combinations can help companies reach new geographic markets, expand product offerings, or achieve various synergies. Business combinations offer a number of benefits to the parties involved, but the initial accounting for the business combination can be complicated and often requires extensive time and effort. The authoritative accounting and reporting guidance for business combinations under US GAAP is included in Topic 805, Business Combinations, of the FASB Accounting Standards Codification. Topic 805 interacts with various other technical areas of the Codification, such as the guidance on consolidation (the concept of control), fair value measurements, income taxes, and share-based payments. Thus, a reporting entity must be familiar with not only Topic 805, but also these other technical areas. In this first course of our six-part course series on Business Combinations, we will cover, in depth, the steps that must be taken to properly account for every business combination transaction.