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FASB issues ASU simplifying private-company accounting for intangible assets in a business combination

  • FASB document Image

Dec 23, 2014

The FASB has issued Accounting Standards Update (ASU) No. 2014-18, “Accounting for Identifiable Intangible Assets in a Business Combination,” in response to the PCC’s final consensus on Issue 13-01A. The ASU contains an accounting alternative for private companies that acquire identifiable intangible assets in a business combination.

Under the accounting alternative, many customer-related intangible assets and all noncompete agreements would not be recognized separately and would be subsumed into goodwill. An entity that elects this alternative is also required to adopt the alternative accounting in FASB Accounting Standards Update No. 2014-02, Accounting for Goodwill. (However, an entity that elects to adopt the goodwill alternative does not need to adopt the guidance in ASU 2014-18.) ASU 2014-18 does not require an entity to provide any incremental disclosures beyond those required by ASC 805.

Once elected, the accounting alternative would be applied to all future business combinations entered into in the first annual period beginning after December 15, 2015. Early adoption would be permitted.

For more information, see the press release, ASU, and FASB in Focus newsletter on the FASB’s Web site.

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