Acquisition Accounting

AAA

DEFINITION of 'Acquisition Accounting'

A set of formal guidelines describing how assets, liabilities, noncontrolling interest and goodwill of a target company must be reported by a purchasing company on its Consolidated Statement of Financial Position. With acquisition accounting the fair market value of the acquired firm is allocated between the net tangible and intangible assets portion of the balance sheet of the acquiring firm; any difference is regarded as goodwill. Also called "business combination accounting."

INVESTOPEDIA EXPLAINS 'Acquisition Accounting'

International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) require all business combinations to be treated as acquisitions for accounting purposes, meaning that one company must be identified as an acquirer and one company must be identified as an acquiree even if the transaction creates a new company. In the past, a method called "purchase accounting" was used in business combination accounting, but standard changes made acquisition accounting the only acceptable method.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Goodwill

    An account that can be found in the assets portion of a company's ...
  3. Continuity Of Interest Doctrine ...

    A doctrine which stipulates that a corporate acquisition can ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Pooling Of Interests

    A method of accounting that allows the balance sheets of two ...
  6. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. Analyzing An Acquisition Announcement
    Investing Basics

    Analyzing An Acquisition Announcement

  3. The Merger - What To Do When Companies ...
    Investing Basics

    The Merger - What To Do When Companies ...

  4. Mergers & Acquisitions: An Avenue For ...
    Forex Education

    Mergers & Acquisitions: An Avenue For ...

comments powered by Disqus
Hot Definitions
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  2. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  4. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  6. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
Trading Center