Chapter 4 — Recognizing and Measuring the Identifiable Assets Acquired and Liabilities Assumed

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Chapter 4 — Recognizing and Measuring the Identifiable Assets Acquired and Liabilities Assumed

This chapter addresses the recognition and measurement of the identifiable assets acquired and liabilities assumed in a business combination, which is part of step 3 of the acquisition method (see Section 1.1.3). The recognition and measurement of noncontrolling interests, also part of step 3, is addressed in connection with the accounting for partial acquisitions in Section 6.4.

4.1 Recognition and Measurement Principles

4.1.1 Use of a Third-Party Specialist to Measure Fair Value

4.2 Classifying or Designating the Assets Acquired and Liabilities Assumed

4.3 Exceptions to Recognition, Measurement, and Designation or Classification of Assets or Liabilities

4.3.1 Exceptions to Recognition and Measurement

4.3.2 Exceptions to Designation or Classification of Assets or Liabilities

4.3.3 List of Exceptions to the Recognition, Measurement, Designation, or Classification of Assets or Liabilities

4.3.4 Indemnification Assets

4.3.5 Assets Held for Sale

4.3.6 Assets and Liabilities Arising From Contingencies

4.3.7 Reacquired Rights

4.3.8 Income Taxes

4.3.9 Employee Benefits

4.3.10 Purchased Financial Assets — After Adoption of ASU 2016-13

4.3.11 Leases

4.3.12 Insurance or Reinsurance Contracts

4.3.13 Contract Assets and Contract Liabilities — After Adoption of ASU 2021-08

4.4 Working Capital

4.5 Assets With Uncertain Cash Flows (Valuation Allowances)

4.6 Financial Instruments

4.6.1 Acquiree’s Equity Investments

4.6.2 Derivatives

4.7 Inventory

4.7.1 Finished Goods

4.7.2 Work in Process

4.7.3 Raw Materials

4.7.4 Supply Inventory

4.7.5 LIFO Inventories

4.8 Property, Plant, and Equipment

4.8.1 PP&E Subject to Asset Retirement Obligations

4.8.2 Mineral Rights and Mining Assets

4.9 Assets That the Acquirer Does Not Intend to Use, or Intends to Use in a Manner Other Than Their Highest and Best Use

4.10 Intangible Assets

4.10.1 Initial Recognition of Intangible Assets

4.10.2 Initial Measurement of Intangible Assets

4.10.3 Combining Intangible Assets Into a Single Unit of Account

4.10.4 Examples of Identifiable Intangible Assets

4.10.5 Subsequent Accounting for Intangible Assets

4.11 Assets and Liabilities Associated With Revenue Contracts — Before Adoption of ASU 2021-08

4.11.1 Contract Assets and Contract Liabilities — Before Adoption of ASU 2021-08

4.11.2 Long-Term Revenue Contracts — Before Adoption of ASU 2021-08

4.11.3 Business Combinations Before the Adoption of ASC 606

4.12 Debt

4.12.1 Reporting Consideration Related to Debt and Other Liabilities of the Acquiree Settled at or in Close Proximity to the Acquisition Date

4.12.2 Additional Measurement Considerations Related to Acquiree’s Debt

4.12.3 Changes in an Acquirer’s Debt as a Result of a Business Combination

4.12.4 Accounting for Debt Between the Acquirer and the Acquiree in a Business Combination

4.13 Guarantees

4.14 Liabilities for Exit or Restructuring Activities

4.15 Instruments Indexed to or Settled in Shares and Classified as Liabilities

4.16 Conforming Accounting Policies

4.17 Subsequent Measurement of Assets Acquired and Liabilities Assumed

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.