Statement of Financial Accounting Standards No. 141 (R), Business Combinations, issued by the Financial Accounting Standards Board, promises to change how companies approach planning and reporting around mergers, acquisitions and ownership changes.The statement, effective for companies with fiscal years beginning after Dec. 15, 2008, covers how an acquirer should recognize and measure the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree; recognize and measure the goodwill acquired in the business combination or a gain from a bargain purchase; and determine what information to disclose to statement users.

In a poll by Deloitte of more than 1,850 executives, 40 percent said that the standard would cause them to rethink deal strategy or have an impact on planned deal activity. Only 4 percent said that their companies had finished assessing the impact of the standard.

Deloitte recommended that deal teams prepare for some key changes, including:

* In-process research and development: SFAS 141(R) mandates recognition of IPR&D as an intangible asset separate from goodwill at acquisition, with no immediate write-off.

* Initial recognition of contingent assets and liabilities: SFAS 141 (R) will set fair value for all contractual and certain noncontractual contingencies at the acquisition date.

* Step acquisitions: Under SFAS 141 (R), a previously held interest in a company must be re-measured at fair value following purchase of an additional interest and control.

* Measurement date for equity securities issued in a business combination: Under the new rule, the acquisition date becomes the measurement date.

* Recognition of contingent considerations at acquisition date and in subsequent periods: Under SFAS 141 (R), in addition to being recorded at fair value at the acquisition date, contingent consideration arrangements recorded as liabilities must be marked to market each period through earnings.

* Acquisition-related costs of the acquirer: Under SFAS 141 (R), acquisition-related costs need to be accounted for separately in the business combination. In general, transaction costs will be expensed and will not be accounted for as a component of goodwill.

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