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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 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 2.6.3.5 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
  • BCG 6.3.2 was enhanced to further address the interaction of ASC 810-10 and ASC 480-10-S99 when recognizing redeemable NCI.
Revisions made in September 2020
Chapter 4: Intangible assets acquired in a business combination
  • BCG 4.1 was updated to discuss guidance on accounting for acquired intangible assets that meet the held for sale criteria in ASC 360-10, Property Plant and Equipment.
  • BCG 4.3.3.7 was updated to reflect the revised effective dates for adoption of ASC 842, Leases.
  • BCG 4.3.4.1 was enhanced to provide additional insights related to the recognition of IPR&D assets.
Chapter 8: Accounting for indefinite-lived intangible assets
  • Example BCG 8-5 in BCG 8.4 was updated to discuss the recognition, initial measurement, and subsequent measurement of a defensive intangible asset.
Chapter 9: Accounting for goodwill postacquisition
  • BCG 9.1 was updated to reflect the revised effective dates for adoption of ASU 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
  • BCG 9.7.6 was updated to add Question BCG 9-20, which considers the accounting treatment of a change in valuation technique when testing goodwill for impairment.
  • Former BCG 9.11 was removed. The related guidance is included in PwC’s Financial statement presentation guide (FSP 8.10.2).
Chapter 10: Pushdown accounting
  • Former BCG 10.2 was removed. The related guidance was moved to PwC’s Insurance contracts guide (IG 12).
Revisions made in June 2020
Chapter 1: Overview of accounting for business combinations
  • Figure BCG 1-1 was enhanced to reflect the framework for evaluating whether an acquired set is a business or a group of assets subsequent to adoption of ASU 2017-01.
  • BCG 1.2.1 was enhanced by providing additional factors to consider when there is uncertainty around whether the quantitative threshold of the screen test is met.
  • BCG 1.2.1.3 was enhanced by adding guidance on the treatment of a bargain purchase gain for the purpose of applying the screen test.
  • BCG 1.2.2.1 was updated to provide additional guidance on evaluating an acquired set with limited outputs.
  • BCG 1.2A was removed. The related guidance on the definition of a business prior to adoption of ASU 2017-01 was superseded.
  • BCG 1.3.5 was added to provide guidance on the application of the acquisition method by an acquirer even when control is temporary.
Chapter 2: Acquisition method
  • BCG 2.4 was enhanced to provide additional guidance on determining the acquisition date.
  • BCG 2.5.2 and BCG 2.5.2A were updated to reflect the guidance on asset valuation allowances in a business combination subsequent to and prior to adoption of ASU 2016-13, respectively.
  • BCG 2.5.7.2 was enhanced to provide additional guidance on measuring asset retirement obligations.
  • BCG 2.5.9 was updated to discuss the guidance in ASU 2019-12, which is further discussed in PwC’s Income taxes guide.
  • BCG 2.5.11 was enhanced to provide additional guidance on accounting for cash paid by the acquirer to settle the acquiree’s debt at closing.
  • BCG 2.5.16 through BCG 2.5.16.4 were added to provide guidance on acquired revenue contracts with customers subsequent to the adoption of ASC 606.
  • Former BCG 2.5.20 through BCG 2.5.20.2 were removed. The related guidance prior to adoption of ASC 606 was superseded.
  • BCG 2.6.3.3 and BCG 2.6.3.4 were added to address consideration held in escrow and working capital adjustments, respectively. Former Question BCG 2-7 and Question BCG 2-8 were removed.
  • BCG 2.6.5.4 was enhanced by adding Figure BCG 2-1 to illustrate the accounting for contingent consideration by the seller.
  • BCG 2.7 was enhanced by adding guidance on the accounting for litigation that arises between the acquirer and the former owners of the acquiree related to a business combination.
  • BCG 2.7.1 through BCG 2.7.1.5 was added to provide further guidance on acquisition-related costs in a business combination.
Chapter 5: Partial acquisitions and changes in NCI
  • BCG 5.4.8 was added to provide guidance for the acquisition of additional ownership interests by a parent involving contingent consideration payable to the selling (noncontrolling) shareholders.
Copyrights
This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance.
The FASB Accounting Standards Codification® material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.
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