Within this guide, these adjustments are referred to as assets and liabilities for consistency with the treatment by the FASB. The FASB has characterized the differences in contract terms relative to market terms as assets and liabilities, but these adjustments in value are unlikely to meet the definitions of an asset and liability. On the other hand, if the terms of the acquired contract are unfavorable relative to market prices, then a liability is recognized. If the terms of an acquired contract are favorable relative to market prices, an intangible asset is recognized. In making this assessment, the terms of a contract should be compared to market prices at the date of acquisition to determine whether an intangible asset or liability should be recognized. Intangible assets or liabilities may be recognized for certain off balance sheet contracts whose terms are favorable or unfavorable compared to current market terms. This section addresses acquired contracts that are favorable or unfavorable, except for lease contracts, which are discussed in BCG 4.3.3.7. The remaining purchase price ($18 million) will be allocated to the net assets acquired, excluding the noncompete agreement. For example, if an entity pays $20 million to acquire a target, including a noncompete agreement with a fair value of $2 million, the noncompete agreement should be recognized separately at a fair value of $2 million. As such, noncompete agreements negotiated as part of a business combination should generally be accounted for as transactions separate from the business combination. Transactions are to be treated separately if they are entered into by or on behalf of the acquirer or primarily for the benefit of the acquirer. A noncompete agreement negotiated as part of a business combination will typically be initiated by the acquirer to protect the interests of the acquirer and the combined entity. The agreement typically covers a set period of time that commences after the acquisition date or termination of employment with the combined entity. Transfers and servicing of financial assetsĪ noncompete agreement negotiated as part of a business combination generally prohibits former owners or key employees from competing with the combined entity. Revenue from contracts with customers (ASC 606) Loans and investments (post ASU 2016-13 and ASC 326) Investments in debt and equity securities (pre ASU 2016-13) Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12)

IFRS and US GAAP: Similarities and differences Business combinations and noncontrolling interestsĮquity method investments and joint ventures

Acoounting term for prepaid orders