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This chapter discusses the key characteristics of a business and identifies which transactions require the application of business combination accounting. Business combination accounting is referred to as the “acquisition method” in ASC 805, Business Combinations. See discussion of the acquisition method in BCG 2. Determining whether the acquisition method applies to a transaction begins with understanding whether the transaction involves the acquisition of one or more businesses and whether it is a business combination within the scope of ASC 805.
All transactions in which an entity obtains control of one or more businesses qualify as business combinations, as described in the FASB’s Master Glossary. ASC 805-10-25-1 further establishes the principle for identifying a business combination.

Excerpt from ASC Master Glossary
business combination: A transaction or other event in which an acquirer obtains control of one or more businesses.

Excerpt from ASC 805-10-25-1
An entity shall determine whether a transaction or other event is a business combination by applying the definition in this Subtopic, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not a business, the reporting entity shall account for the transaction or other event as an asset acquisition.


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