Technical Line - Accounting for deals with puts, calls or forward contracts can be complex
Although the overall volume of merger and acquisitions activity has decreased slightly in recent years, we are seeing an increase in the complexity of deal structures, particularly those using call or put options or forward contracts (collectively referred to as equity contracts) that allow the buyer and seller to share the economic risks of an acquired business for a period of time. This Technical Line - the second in a series - addresses the accounting for equity contracts issued in a business combination. In December 2012, we issued a companion publication (pdf, 470.4kb) , which addressed the accounting and valuation considerations for contingent consideration issued in a business combination.

Financial Reporting Developments - Business combinations
We have updated our Financial reporting developments publication, Business combinations to provide insights from the SEC, updates on recent standard-setting activities and further clarifications and enhancements to our interpretative guidance.

Technical Line - Complex deal structures can affect future earnings and other metrics
We are seeing an increase in the complexity of deal structures, particularly those using contingent consideration or call or put options or forward contracts that allow the buyer and seller to share the economic risks of an acquired business for a period of time. This Technical Line – the first in a two-part series – addresses the accounting and valuation considerations for contingent consideration issued in a business combination. A companion publication that we will issue soon will address the accounting for equity contracts entered into between a buyer and a noncontrolling interest holder when the buyer acquires a controlling interest in an acquiree.

Financial Reporting Developments - Intangibles - Goodwill and other
We have updated our Financial Reporting Developments, Intangibles – Goodwill and other, to incorporate recent standard-setting activities and further clarifications and enhancements to our interpretive guidance.

Technical Line - How to qualitatively assess indefinite-lived intangibles for impairment
Accounting Standard Update (ASU) 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-lived Intangible Assets for Impairment, introduced an optional qualitative assessment for testing indefinite-lived intangible assets for impairment that may allow companies to avoid the annual calculation of the assets’ fair value. This Technical Line provides a framework for companies to consider when determining whether and how to apply the guidance and an example of a hypothetical company’s qualitative assessment.

To the Point - Qualitative impairment test added for indefinite-lived intangibles
The FASB issued final guidance giving companies the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. Our To the Point summarizes what you need to know about the Accounting Standards Update.

Comment Letter - Testing indefinite-lived intangible assets for impairment
In our comment letter, we support the Board’s efforts to reduce the cost and complexity of performing the impairment test. We also say the Board should consider adding implementation guidance on how to assess a mix of positive and negative evidence affecting the significant inputs used to determine fair value.

To the Point - FASB tries to simplify impairment test for indefinite-lived intangibles
Based on concerns raised by financial statement preparers about recurring costs and complexity of calculating the fair value of indefinite-lived assets for impairment testing, the FASB today issued a proposed ASU to simplify the impairment test. The proposal would give companies the option to perform a qualitative assessment (similar to the one introduced by ASU 2011-08 for goodwill) to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. Comments are due by 24 April 2012.

Technical Line - How to use the new qualitative screen to test goodwill for impairment
Accounting Standard Update (ASU) 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment, introduced an optional qualitative assessment for testing goodwill for impairment that may allow companies to skip the annual two-step test. This Technical Line provides a framework for companies to consider when determining whether and how to apply the qualitative screen.

To the Point - Optional screen for goodwill impairment
The FASB issued an ASU on testing goodwill for impairmentwhich gives companies the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and, in some cases, skip the two-step impairment test. The ASU is effective for fiscal years beginning after 15 December 2011 and early adoption is permitted. Our To the Point summarizes what you need to know about the ASU.

Comment Letter - Testing goodwill for impairment
Our comment letter supports the Board's efforts to reduce the cost and complexity of performing the first step of the goodwill impairment test. We also say the Board should consider adding implementation guidance and consider allowing the use of a qualitative screen for the impairment testing of indefinite-lived intangible assets.

To the Point - Screen considered for goodwill impairment testing
Based on concerns raised about recurring costs and complexity regarding the calculation of fair value, the Board issued a proposed ASU to simplify how a company is required to test goodwill for impairment. Our To the Point summarizes the proposal.

Hot Topic - Definition of a business
Our Hot Topic provides an overview of the guidance on the definition of a business in ASC 805 as well as examples of the application of this guidance to certain transactions in the life sciences, real estate and extractive industries.

Hot Topic - Proposed ASU: acquired R&D assets and contingent consideration in an asset acquisition
Our Hot Topic discusses a FASB proposal that would address the accounting for acquired research and development assets and contingent consideration in an asset acquisition.

Technical Line - Implications of Statement 141(R) on mutual entities
Our Technical Line summarizes the implications of Statement 141(R) for business combinations of mutual entities.

Hot Topic - FASB issues Statement 164 on business combinations by not-for-profit entities
Our Hot Topic addresses Statement 164 that amends the accounting for business combinations between two or more not-for-profit entities and establishes principles and requirements for how a not-for-profit entity determines whether a combination is a merger or an acquisition.

Hot Topic - FASB issues FSP FAS 141(R) on preacquisition
Our Hot Topic summarizes FSP FAS 141(R)-1. The FSP significantly changes the accounting for pre-acquisition contingencies required by Statement 141(R) and has the same effective date as Statement FAS 141(R).

Technical Line - FAS 142 impairment testing subsequent to the adoption of FAS 141(R), 157 and 160
Our Technical Line highlights the amendments made to FASB Statement No. 142¸ Goodwill and Other Intangible Asset by Statements No. 141(R) No. 157 and No. 160.

Comment Letter - Proposed FSP FAS 141(R)-a-Preacquisition contingencies in business combinations
This comment letter presents our views on the proposed FASB FSP on pre-acquisition contingencies in business combinations.

Hot Topic - Goodwill impairment considerations
Our Hot Topic is a reminder to consider the effect current conditions may have on goodwill impairment testing, including the need to perform interim impairment tests and the role market capitalization plays in the goodwill impairment model.

Hot Topic - FASB issues proposed FSP on preacquisition contingencies
Our Hot Topic discusses the provisions of a proposed FSP that would amend Statement No. 141(R) by significantly changing the accounting for pre-acquisition contingencies required by Statement 141(R).

Hot Topic - Statement 141(R) implementation series
Our Hot Topic focuses on issues related to the implementation of the new FASB standard on business combinations under Statement 141R.