Valuation for Financial Reporting : Fair Value Measurements and ...

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Benefits and Costs 59m. The acquirer would be required to recognize separately from goodwill theacquisition-date fair value of research and development assets acquired in abusiness combination. This Statement supersedes Interpretation 4, whichrequired research and development assets acquired in a business combinationthat have no alternative future use to be measured at their fair value and expensedat the acquisition date.n. The acquirer would be required to account for any changes in the amount of itsdeferred tax benefits that are recognizable (through the increase or reduction ofthe acquirer’s valuation allowance on its previously existing deferred tax assets)as a result of a business combination separately from that business combination.This Statement would amend Statement 109 to require such changes in theamount of the deferred tax benefits to be recognized either in income fromcontinuing operations in the period of the combination or directly to contributedcapital, depending on the circumstances. Statement 109 had required that areduction of the acquirer’s valuation allowance as a result of a businesscombination be recognized through a corresponding reduction to goodwill orcertain noncurrent assets or an increase in negative goodwill.BENEFITS AND COSTSX. The Boards have striven to issue a proposed Statement with commonrequirements that will fill a significant need and for which the costs imposedto apply it, as compared with other alternatives, are justified in relation to theoverall benefits of the resulting information. The Boards concluded that thisproposed Statement would, for the reasons previously noted, make severalimprovements to financial reporting that would benefit investors, creditors,and other users of financial statements.XI. The Boards sought to reduce the costs of applying this proposed Statement.This proposed Statement would (a) require particular assets and liabilities (forexample, those related to deferred taxes, assets held for sale, and employeebenefits) to continue to be measured and recognized in accordance withexisting generally accepted accounting principles rather than at fair value and(b) require its provisions to be applied prospectively rather than retrospectively.The Boards acknowledged that those two steps may diminish somebenefits of improved reporting provided by this proposed Statement. However,the Boards concluded that the complexities and related costs that would resultfrom imposing a fair value measurement requirement at this time to all assetsacquired and liabilities assumed in a business combination and requiringretrospective application of the provisions of this proposed Statement are notjustified.XII. In addition, improving the consistency of the procedures used in accountingfor business combinations, including international consistency, should help
60 Valuation for Financial Reportingalleviate concerns that an entity’s competitive position as a potential bidder isaffected by differences in accounting for business combinations. Consistencyin the accounting procedures also can reduce the costs to prepare financialstatements, especially for entities with global operations. Moreover, suchconsistency also will enhance comparability of information among entities,which can lead to a better understanding of the resulting financial informationand reduce the costs to users of analyzing that information.ISSUANCEAt the date of this writing, the FASB projects issuing. Statement of FinancialAccounting Standards No. 141R, Business Combinations, a Replacement of FASBStatement No. 141, in the second half of 2007.
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VALUATION FORFINANCIALREPORTINGFair
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VALUATION FORFINANCIALREPORTINGFair
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To our familiesnear and faryoung an
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PrefaceThe second edition of this b
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AcknowledgmentsTo Deanna Muraki, th
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xivAbout the Authorsappraiser with
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Valuation for FinancialReportingFai
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210 IndexBusiness Enterprise Analys
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212 IndexGoodwill (continued )111,
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214 IndexLong-termcapital, 71debt,
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216 IndexSecurities and Exchange Co
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