Statement 141(R) Begins - With A Big Broom: "Sweeping" is perhaps the best word that describes the changes in acquisition accounting coming up in a few short months. Around the turn of the century, the original Statement 141, "Business Combinations," tossed out the opaque pooling-of-interests accounting choice for merger accounting. In tandem with Statement 142, "Goodwill and Other Intangible Assets," which ended the amortization of goodwill, the last revision of acquisition accounting seemed revolutionary.
As far-reaching as those changes were, there was plenty of room for improvement in accounting for acquisitions. Four years after the 2001 standards went into effect, the FASB and the IASB jointly considered revising their respective business combination standards. The completed FASB standard, Statement 141(R), goes into effect in years beginning after December 15, 2008. Naturally, it will only affect those firms making acquisitions - so there won’t be any broad-based effects to notice immediately. Over time, however, practically all companies acquire others - and the increased transparency created by Statement 141(R) around deals will show much more about the economics of deal-making and the after-effects. The overarching theme of the new standard: more fair value reporting, at the time of an acquisition and in reporting afterwards.