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Public Company Advisory - FASB Clarifies Requirements for Disclosures on Combinations

Wednesday, December 29, 2010 - Frank Gonzalez, CPA/CFF, Steven Morrison, CPA

Frank Gonzalez

Steven Morrison

The Financial Accounting Standards Board (FASB) on December 21, 2010 issued an Accounting Standards Update that clarifies the requirements for public companies on the disclosure of pro forma information for business combinations occurring in a current reporting period.

Accounting Standards Update No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations specifies that, when presenting pro forma information, if a public company presents comparative financial statements the entity should disclose revenue and earnings of the combined entity as though the business combination or combinations occurring during the current year had occurred only as of the beginning of the comparable annual reporting period.

The FASB said it issued the Update because there has been diversity in practice in the way that public companies had presented pro forma information after business combinations.

It said that in practice, some preparers have presented the pro forma information in their comparative financial statements as if the business combination that occurred in the current reporting period had occurred as of both the beginning of each of the current and prior annual reporting periods. Conversely, other preparers have disclosed the pro forma information as if the business combination occurred only at the beginning of the prior annual reporting period, and then carried forward the related adjustments through the current reporting period.

ASU 2010-29 is effective prospectively for business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010.

If you would like additional information on the Accounting Standards Update on disclosure requirements of pro forma information on business combinations, do not hesitate to contact us at (305) 373-5500.