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Retrospectively, reporting measurement period adjustments to amounts recognized in business combinations will soon be a thing of the past. Stakeholders shared that the cost outweighed the benefit and the Financial Accounting Standards Board (FASB) listened. On Friday, Sept. 28 the FASB issued Accounting Standards Update (ASU) No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustment, as part of its simplification initiative. The ASU requires an acquirer to recognize measurement period adjustments in the reporting period in which the adjustment amounts are determined and does away with the current GAAP requirement to retrospectively adjust the provisional amounts recognized. The update also requires that the acquirer show on the financial statements the current period effect on earnings due to changes in depreciation, amortization or any other income effects. In addition, the amount recorded in current period earnings that would have been recorded in previous reporting periods, if the adjustment had been recognized on the acquisition date, should also be presented on the face of the income statement or disclosed in the notes.
This guideline goes into effect for public business entities with fiscal years beginning after Dec.15, 2015 and for all other entities with fiscal years beginning after Dec.15, 2016. Earlier application is permitted for financial statements that have not yet been issued
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