SFAS 141R, Business Combinations (#64)
/In this podcast episode, we discuss the new requirements of SFAS 141R, Business Combinations. Key points made are:
Most assets and liabilities associated with an acquisition transaction should be recorded on the acquirer’s balance sheet at fair value.
Any noncontrolling interest in the acquiree is valued at its fair value.
The acquisition method is now used, instead of the purchase method.
Everything should be valued as of the acquisition date.
The cost of the acquisition is charged to expense as it is incurred, because these expenditures do not meet the definition of an asset.
In-process research is recognized as an asset; it is amortized or written off later.
Contingent consideration (an earnout) is to be recognized up front, at its expected fair value.