5.5 Acquirer’s Equity Securities Issued as Consideration
If the acquirer issues its equity securities (e.g., common or preferred shares, options, or warrants)
as consideration in the business combination, it measures the equity securities at fair value as of
the acquisition date by applying ASC 820. If its equity instruments are publicly traded, the acquirer
determines the fair value on the basis of quoted market prices. If the shares are not publicly traded, the
acquirer must use other valuation techniques to measure the fair value the equity instruments.
5.5.1 Issuance of Subsidiary Shares as Consideration
The consideration transferred in a business combination could include shares of a subsidiary of the
acquirer. If so, such shares issued would be measured as of the acquisition date at fair value under
ASC 820. If the acquirer retains its controlling interest in the subsidiary, the acquirer would account for
the issuance of its subsidiary’s shares as an equity transaction under ASC 810-10-45-23. That guidance
states that “[t]he carrying amount of the noncontrolling interest shall be adjusted to reflect the change
in its ownership interest in the subsidiary” and that “[a]ny difference between the fair value of the
consideration received or paid and the amount by which the noncontrolling interest is adjusted shall be
recognized in equity attributable to the parent.”