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Entities may choose to acquire assets, rather than construct or develop them through capital projects. This chapter discusses the accounting for acquisitions of an asset or group of assets in accordance with ASC 805-50.
Determining whether a transaction represents an asset acquisition or a business combination is a critical step as there are significant differences in the accounting. Most significantly, asset acquisitions are accounted for using a cost accumulation model, with the cost of the acquisition allocated to the acquired assets based on their relative fair values. In contrast, business combinations are accounted for using a fair value model, with any excess consideration transferred recognized as goodwill. See PPE 2.7 for a summary of significant accounting differences between asset acquisitions and business combinations.
Before applying the asset acquisition guidance of ASC 805-50, a reporting entity must first determine whether an acquired set represents (1) a business or (2) an asset or group of assets. See BCG 1 for the accounting for transactions that are within the scope of ASC 805 and a discussion of the difference between an acquisition of a business and an acquisition of an asset or group of assets.
A change in interest of a subsidiary that is not a business or a nonprofit that does not result in loss of control should be accounted for as an equity transaction. Therefore, no gain or loss should be recognized in the income statement. The difference between the fair value of the consideration paid (received) and the related carrying value of the NCI acquired (sold) should be recognized in the controlling entity’s equity/APIC. The carrying value of the NCI obtained should be reclassified to the controlling entity’s equity. The carrying value of the controlling interest sold should be reclassified from the controlling entity’s equity to NCI. See PPE 6.2.4.1 for additional information.

2.1.1 Asset acquisitions scope exception–variable interest entities

Pursuant to ASC 805-50-15-4, the guidance for asset acquisitions in ASC 805-50 does not apply to a reporting entity that is the primary beneficiary of a variable interest entity (VIE) when the VIE does not meet the definition of a business. Instead, the primary beneficiary should follow the guidance in ASC 810-10-30-3 through ASC 810-10-30-4 to initially consolidate a VIE that is not a business. See CG 2.5 for additional information.
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