Introduction to Business Combinations
What Is a Business Combination?
A business combination occurs when one entity obtains control of another business. Under U.S. GAAP (ASC 805), nearly all business combinations are accounted for using the acquisition method. The objective is to report the acquired business at its fair value on the acquisition date.
Business combinations occur through mergers, acquisitions, stock purchases, asset purchases, or other transactions that result in one company controlling another.
Note
Control generally exists when an entity obtains more than 50% of the voting interests, although control may exist in other circumstances.
- Mergers.
- Stock acquisitions.
- Asset acquisitions.
- Statutory consolidations.
- Reverse acquisitions.
Summary
Business combinations occur when one company gains control over another and are generally accounted for using the acquisition method.