PwC is pleased to offer our updated accounting and financial reporting guide, Business combinations and noncontrolling interests.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues.
This guide should be used in combination with a thorough analysis of the relevant facts and circumstances, review of the authoritative accounting literature, and appropriate professional and technical advice.
References to US GAAP
Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to chapters in other PwC guides to assist users in finding other relevant information. References to other guides are indicated by the applicable guide abbreviation followed by the specific section number. The other PwC guides referred to in this guide, including their abbreviations, are:
- Bankruptcies and liquidations (BLG)
- Consolidation (CG)
- Derivatives and hedging (DH)
- Equity method investments and joint ventures (EM)
- Fair value measurements, global edition (FV)
- Financial statement presentation (FSP)
- Financing transactions (FG)
- Foreign currency (FX)
- Income taxes (TX)
- Insurance contracts (IG)
- Leases (LG)
- Loans and investments (LI)
- Not-for-profit entities (NP)
- Property, plant, equipment and other assets (PPE)
- Revenue from contracts with customers (RR)
- Stock-based compensation (SC)
Summary of significant changes
The following is a summary of recent noteworthy revisions to the guide. Additional updates may be made to future versions to keep pace with significant developments.
Revisions made in June 2021
Chapter 4: Intangible assets acquired in a business combination
- BCG 4.5 was updated to enhance the discussion around accounting for assets an acquirer does not intend to use (defensive intangible assets). This content was previously included in BCG 8.4.
Chapter 5: Partial acquisitions and changes in NCI
- BCG 5.3 was updated to address the accounting for equity interests prior to obtaining control.
- BCG 5.3.2 was enhanced to discuss the accounting for a previously held equity interest that was accounted for using the measurement alternative under ASC 321 when the investor subsequently obtains control.
- BCG 5.3.4 was enhanced to discuss the fair value measurement considerations for a noncontrolling interest and previously held equity interest when obtaining control through a step acquisition.
- BCG 5.4 was updated to address the scope of the guidance for changes in a parent’s ownership interest in a subsidiary (ASC 810-10-45-21A).
- BCG 5.4.5 was enhanced to discuss the accounting for a disposal of a noncontrolling interest in a foreign entity that does not result in a loss of control.
- BCG 5.5 was updated to address the scope of the guidance for changes in a parent’s ownership interest in a subsidiary that result in loss of control (ASC 810-10-40-3A).
- The order of certain sections within BCG 5 was rearranged. Former BCG 5.5.5 was moved to BCG 5.3.7, and former BCG 5.6 was moved to BCG 5.4.9.
Chapter 7: Common control transactions
- The order and numbering of BCG 7 was rearranged.
- Former BCG 7.2 and former Figure BCG 7-1 were moved to BCG 7.1.2.
- BCG 126.96.36.199 and Figure BCG 7-1 were added to address the accounting for Up-C structures.
- Specialized accounting considerations related to real estate that were included in former BCG 188.8.131.52, including Example BCG 7-2, were removed. The related guidance prior to adoption of ASC 606 and ASC 610-20 was superseded.
- Former Example BCG 7-3 in former BCG 184.108.40.206 was moved BCG 220.127.116.11 as Example BCG 7-1 to provide guidance related to a transaction when common management may exist.
- Former Example BCG 7-4 in former BCG 18.104.22.168 was moved BCG 22.214.171.124 as Example BCG 7-8 to provide guidance related to a transaction when property is sold to a subsidiary and then sold to a third party.
- BCG 126.96.36.199 was enhanced to provide additional guidance related to determining the receiving entity.
- BCG 188.8.131.52 was enhanced to provide additional guidance on the transferring entity’s accounting for goodwill allocated to the transferred entity.
Chapter 8: Accounting for indefinite-lived intangible assets
- BCG 8.2.1 was enhanced to discuss the impairment considerations when reclassifying an intangible asset to/from indefinite lived.
- BCG 8.2.4 was updated to address the accounting for IPR&D intangible assets that are acquired and subsequently abandoned.
- BCG 184.108.40.206 was enhanced to discuss certain considerations when evaluating the unit of accounting for the impairment test of indefinite-lived intangible assets.
- BCG 220.127.116.11 was added to provide guidance on accounting for the removal of a portion of an indefinite-lived intangible asset from a single unit of account.
- Former BCG 8.4 was removed. The related guidance, which addressed the accounting for assets an acquirer does not intend to use (defensive intangible assets), was moved to BCG 4.5.
Revisions made in March 2021
Chapter 1: Overview of accounting for business combinations
- Figure BCG 1-1 in BCG 1.2 was enhanced to update the framework for evaluating whether an acquired set is a business or a group of assets.
- BCG 1.2.2 was enhanced to provide additional information regarding an organized workforce.
Chapter 2: Acquisition method
- BCG 18.104.22.168 was added to provide guidance on the accounting for deferred consideration (i.e., future payments that are based solely on the passage of time), including the addition of Example BCG 2-16.
- The existing guidance in BCG 2.11 and Figure BCG 2-3 were enhanced to provide additional information regarding the acquisition of a variable interest entity that is not a business.
- BCG 2.12 was updated to discuss the accounting for conforming accounting policies in circumstances in which the acquirer may not have an existing accounting policy.
Chapter 6: Noncontrolling interests
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