7.1 Disclosure Objectives
ASC 805-10
Business Combinations Occurring During a Current Reporting Period or After the Reporting Date
but Before the Financial Statements Are Issued
50-1 The acquirer shall disclose information that enables users of its financial statements to evaluate the
nature and financial effect of a business combination that occurs either:
- During the current reporting period
- After the reporting date but before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25).
The Financial Effects of Adjustments That Relate to Business Combinations That Occurred in the
Current or Previous Reporting Periods
50-5 The acquirer shall disclose information that enables users of its financial statements to evaluate the
financial effects of adjustments recognized in the current reporting period that relate to business combinations
that occurred in the current or previous reporting periods.
Other Disclosures
50-7 If the specific disclosures required by this Subtopic and other generally accepted accounting principles
(GAAP) do not meet the objectives set out in paragraphs 805-10-50-1 and 805-10-50-5, the acquirer shall
disclose whatever additional information is necessary to meet those objectives.
Entities must provide separate disclosures for each material business combination that occurs during
the reporting period. However, certain disclosures may be provided in the aggregate for immaterial
business combinations that are material collectively (see Section 7.1.1).
The disclosure requirements apply to all acquirers, with the exception of the
pro forma disclosures required by ASC
805-10-50-2(h), which apply only to public
entities (see Section 7.9 for
more information). Further, in accordance with ASC
270-10-50-5 and ASC 270-10-50-7(a), the disclosure
requirements in ASC 805 also apply to interim
financial reports.
7.1.1 Individually Immaterial Business Combinations That Are Material Collectively
Specific disclosures are required if an acquirer completes multiple immaterial business combinations
in a reporting period that are material collectively. For such business combinations, ASC 805-10-50-3,
ASC 805-20-50-2, and ASC 805-30-50-2 require entities to disclose, in the aggregate, the information
required by the following:
- ASC 805-10-50-2 (e)–(h) (i.e., the disclosures in ASC 805-10-50-2 (a)–(d) are not required. See Section 7.2).
- ASC 805-20-50-1.
- ASC 805-30-50-1.
See the next section for more information about assessing materiality.
7.1.2 Assessing Materiality
ASC 805 does not provide guidance on differentiating between material and
immaterial business combinations or on evaluating when individually immaterial
business combinations are material collectively, so entities need to apply
judgment. Although SEC Regulation S-X, Rule 3-05, specifies thresholds for
registrants related to significance (see Appendix D), those thresholds are
generally higher than the materiality thresholds under ASC 805. Therefore,
registrants must separately determine which financial statement disclosures are
required under ASC 805 for an individually material business combination (or for
individually immaterial business combinations that are material collectively) in
the period presented.
We believe that in addition to the quantitative considerations involved in the
assessment of materiality, entities should
consider qualitative factors, such as the amount
of discussion about a business combination in an
entity’s MD&A, annual report, or press
release.
Unless otherwise indicated, the following discussion of disclosure requirements
applies to all material business combinations and
individually immaterial business combinations that
are material collectively occurring during the
reporting period.