In some business combinations, acquirers may, upon a change in control, cash settle share-based payment awards instead of either accelerating the awards’ vesting provisions or replacing the awards. Like vesting provisions that are accelerated upon a change in control (see Section 10.4), cash settlement provisions should be analyzed carefully in the determination of whether they are part of, or separate from, the business combination. ASC 805-10-25-20 states, in part, that the “acquirer shall recognize as part of applying the acquisition method only the consideration transferred for the acquiree and the assets acquired and liabilities assumed in the exchange for the acquiree. Separate transactions shall be accounted for in accordance with the relevant [GAAP].” In addition, ASC 805-10-25-21 states, in part, that a “transaction entered into by or on behalf of the acquirer or primarily for the benefit of the acquirer or the combined entity, rather than primarily for the benefit of the acquiree (or its former owners) before the combination, is likely to be a separate transaction.” As noted in Section 10.2, ASC 805-10-55-18 also provides three factors to help entities determine whether the transaction primarily benefits the acquirer or the acquiree (i.e., “[t]he reasons for the transaction,” “[w]ho initiated the transaction,” and “[t]he timing of the transaction”).
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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.