The US Financial Accounting Standards Board (FASB) on October 28 released an accounting standard update with guidance on the accounting of revenue contracts with customers that are acquired in a business combination.
The update is intended to improve consistency and align the treatment of acquired revenue contracts with those originated by the acquirer.
The update requires an acquiring entity to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which sets out a single comprehensive accounting model on revenue recognition for contracts with customers.
For public companies, the amendments are effective for fiscal years beginning after December 15, 2022. For other entities, they are effective for fiscal years beginning after December 15, 2023.
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