Business combination accounting generally requires the acquirer to record identifiable assets acquired, liabilities assumed, and any noncontrolling interests at acquisition-date fair value. ASC 805, Business Combinations, contains the guidance for accounting for a business combination. See BCG 1.2 for the framework to use in evaluating whether an integrated set of assets and activities should be accounted for as an acquisition of a business or a group of assets.

A utility or power company involved in a business combination may acquire certain contracts (e.g., power purchase agreements or fuel supply contracts, long-term maintenance agreements, power plant operating licenses). These contracts may be accounted for under specific guidance (e.g., leases, derivatives, revenue) or as executory contracts prior to a business combination and may give rise to contract assets or liabilities or other identifiable intangible assets as part of accounting for the business combination. See BCG 2.5.16 for the accounting for acquired revenue contracts and BCG 4 for guidance on the recognition and initial measurement of contract-related intangible assets. BCG 2.5.19 discusses considerations when accounting for acquired derivative contracts, and BCG 4.3.3.7 discusses accounting for acquired lease contracts.

ASC 805-10-35-1 states that assets and liabilities recognized in a business combination should be subsequently measured based on other applicable GAAP. See PwC’s Property, plant, equipment and other assets guide for information on subsequent accounting for intangible assets. Amortization of intangible assets is discussed in PPE 4.3.3, and impairment of long-lived assets is discussed in PPE 5.2.

See FSP 17 for required disclosures related to a business combination.

Additional considerations for business combinations that involve a regulated utility are discussed in UP 20.