The Financial Accounting Standards Board has issued two statements as it continues on the road to international convergence: on business combinations and on noncontrolling interests in consolidated financial statements.
The statements aim to improve and converge internationally the relevant accounting standards. The International Accounting Standards Board is working on issuing counterparts to the standards early next year.
“Since 2002, we’ve had a well established and formal convergence program with IASB, working on a common and high-quality set of reporting standards,” said FASB Chairman Robert Herz at the IFAC World Accountancy Forum in New York.
FASB Statement No. 141, “Business Combinations (Revised 2007),” aims to create greater consistency in the accounting and reporting of business combinations. The new standard requires the acquiring entity to recognize all (and only) the assets acquired and liabilities assumed in the transaction. It also establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed. The statement requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination.
SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements,” requires all entities to report noncontrolling (minority) interests in subsidiaries in the same way: as equity in the consolidated financial statements. It also eliminates the diversity in accounting for transactions between an entity and noncontrolling interests that currently exists by requiring that they be treated as equity transactions.
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