Private companies have a new option for the recognition of identifiable intangible assets in certain transactions. Released December 23, 2014, the Financial Accounting Standards Board (FASB) ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination permits an alternative for a qualifying private company (see MHM Messenger: Private Company Decision Making Framework & Definition of a Public Business Entity) to not record or measure certain intangible assets that would otherwise be required to be recorded at fair value as part of the following transactions:
- Business combinations pursuant to Topic 805;
- Reorganizations that use fresh start accounting; or
- When assessing the difference between the carrying amount of investments and the amount of underlying equity in an investee’s net assets using the equity method outlined in ASC Topic 323.
The update came out of the Private Company Council‘s concern that the current accounting method for identifiable intangible assets was too costly and complex.
Learn more in our latest MHM Messenger: Private Companies Given Accounting Alternatives for Acquired Intangible Assets.