acquisition accounting

acquisition accounting
The accounting procedures followed when one company is taken over by another. The fair value of the purchase consideration should, for the purpose of consolidated financial statements, be allocated between the underlying net tangible and intangible assets, other than goodwill, on the basis of the fair value to the acquiring company. Any difference between the fair value of the consideration and the aggregate of the fair values of the separable net assets (including identifiable intangibles, such as patents, licences, and trademarks) will represent goodwill. The results of the acquired company should be brought into the consolidated profit and loss account from the date of acquisition only.
Acquisition accounting and merger accounting were covered by Statement of Standard Accounting Practice (SSAP) 23, Accounting for Acquisitions and Mergers, until September 1994, when the Accounting Standards Board issued Financial Reporting Standard 6, Acquisitions and Mergers, and Financial Reporting Standard 7, Fair Values in Acquisition Accounting, which replaced SSAP 23. The relevant International Accounting Standard is IAS 22, Business Combinations.

Accounting dictionary. 2014.

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